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World markets up on central bank actions
2008-03-12
Asian and European stocks rose Wednesday as central banks from the United States to Britain and Europe moved in concert to ease pressure on the world's credit markets. A Wall Street one-day rally, the biggest in years, boosted global market sentiment, but many analysts in Asia remained wary. They point to recent data indicating the U.S. economy -- a vital export market -- could be sliding into a recession. Stocks in Japan and Hong Kong pared gains in afternoon trading after the initial euphoria wore off. "There is some hope that the Fed's move can restore the stability of the financial system," said Ernie Hon, a strategist at ICEA Securities in Hong Kong. "But over the longer-term, I think the (Hong Kong) market will continue its downtrend." Japan's Nikkei 225 index closed 1.6 percent higher at 12,861.13 after rising as much as 3.2 percent. Hong Kong's Hang Seng index pared gains to close 1.9 percent higher at 23,422.76. Markets in Australia, South Korea, Malaysia and Taiwan rose, while China's key index fell to a seven-month low. European markets, which had reacted positively to the central bank plan Tuesday, extended gains Wednesday morning. U.S. stock index futures were higher, suggesting that Wall Street would climb higher after the Dow Jones industrial average surged 416.66, or 3.55 percent, Tuesday to 12,156.81. That was it's biggest one-day point gain since July 2002. That surge was spurred by news that the Fed -- with the European Central Bank, the Bank of Canada and the Swiss National Bank -- would loan investment banks $200 billion (130 billion euros) in exchange for debt, including slumping mortgage-backed securities. The loan period is 28 days, rather than the typical overnight allotments. The move was meant to essentially create a market for assets that investors have been too scared to buy. That freeze-up in demand had sent asset values plunging and caused huge losses for some of the world's biggest banks. In Tokyo trading, the biggest gainers were financial shares, including Mizuho Financial Group, which rose 4 percent. Real estate company Sumitomo Realty & Development advanced 4.4 percent. But traders in Tokyo and Hong Kong believed the rallies in their markets were temporary. "Consumption in the U.S. is still weak," said ICEA's Hon. "April will still be bad (for Hong Kong stocks), but after that it might get better," partly due to an expected rise in investor sentiment ahead of the Beijing Olympics in August. In Australia, the market finished below its intraday highs, with the benchmark S&P/ASX 200 rising 2.4 percent to 5,257.9. In South Korea, too, shares trimmed gains as some technology stocks turned lower and airline stocks fell. The Kospi index climbed 1.1 percent to 1,658.83. In European morning trading, the U.K.'s benchmark FTSE 100 rose 1.4 percent to 5,772.6, while Germany's DAX gained 1.3 percent to 6,611.85. France's CAC 40 was up 1.8 percent. But Chinese stocks fell to their lowest level in more than seven months, reversing early gains as renewed worries over moves to combat inflation overshadowed Wall Street's overnight rally. The Shanghai Composite Index lost 2.3 percent, or 95.76 points, to close at 4,070.12, after opening 2.1 percent higher. The release Tuesday of data showing that China's key inflation index jumped 8.7 percent in February reinforced fears that authorities will raise tighten interest rates or otherwise tighten credit, analysts said. Dow futures were up 38 points, or 0.3 percent, at 12,229, while Standard & Poor's 500 futures were up 4.2 points, or 0.3 percent, at 1,328.1.
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