Thursday October 30, 11:55 AM
Markets jump as investors cheer interest rate cuts
By Roland Jackson
 |
LONDON (AFP) - World (WRGR.TA - news) stock markets raced upwards on Thursday, with Asian indices soaring by about 10 percent, as interest rate cuts sparked bargain hunting after months of misery over the global financial crisis.
Hong Kong shares rocketed 12.8 percent and Tokyo surged 9.96 percent -- the fourth-biggest gain ever as a weaker yen provided a boost to exporters.
Investors shrugged off a weak overnight lead from Wall Street after the US Federal Reserve slashed its key lending rate by a half-point to 1.0 percent.
"Yesterday's rate cut from the Fed was completely expected, however the prospect for more rate cuts in coming months are increasing traders' risk appetite," said Martin Slaney, head of derivatives at GFT Global Markets.
"Asian and European markets have responded well and there is a palpable change in sentiment to the upside."
Seoul surged 11.95 percent, their biggest ever rise, and Singapore won 7.8 percent after the Fed reached a currency swap deal with central banks of South Korea , Singapore, Brazil and Mexico to help them cope with the credit crisis.
Investors welcomed interest rate cuts in the United States, China, Hong Kong and Taiwan -- part of efforts by global banks to avert a financial system meltdown. There was speculation Japan's central bank might follow suit.
In Europe, the Frankfurt market gained 4.58 percent, London was up 1.59 percent and Paris rose 0.97 percent in late morning deals.
"Last night's (US) rate cut... will have encouraged more (investors) to move from cash into equities as they hunt out a better yield," added Iain Griffiths, a dealer with CMC Markets in London.
"Although with the fundamental economic outlook still weak, stocks may well remain constrained," he warned.
The US central bank also gave an unusually bleak assessment of the economy on Wednesday, suggesting there could be further rate cuts ahead as it battles to revive economic growth and stave off the threat of deflation.
Later Thursday, investors will absorb the first estimate of US gross domestic product (GDP) for the third quarter, ahead of Wall Street's reopening at 1330 GMT.
"We do have these hugely significant GDP figures due for release ahead of the (US) market open and estimates are that the (American) economy will contract," added Griffiths.
China's central bank also cut key interest rates on Wednesday in a bid to spur economic growth, the third such move in six weeks.
Taiwan's central bank followed suit on Thursday, lopping 25 basis points off its key lending rate and Hong Kong slashed its rates by 0.5 percentage points to 1.5 percent.
Japan's central bank is also reportedly considering reducing its super-low interest rates to just 0.25 percent this week.
"It is apparent that major central banks have come to the conclusion that aggressive monetary easing is required to support growth," said economist Lee Hardman at The Bank (NASDAQ: TBHS - news) of Tokyo-Mitsubishi UFJ in London.
"Furthermore, the threat posed from upside inflation risks has been replaced by downside risks to price stability leaving plenty of room for monetary easing.
"The synchronized nature of monetary easing by major central banks has in part lead to near-term improvement in sentiment," he added.
Japan's Prime Minister Taro Aso unveiled Thursday a nearly 300 billion-dollar package for Asia's largest economy to weather the global economic crisis, signalling he would hold off on high-risk elections.
Aso, who is trailing in polls and under pressure from the opposition to call snap elections, instead pressed parliament for quick approval of his new 26.9 trillion yen (277 billion dollar) stimulus plan.
The package includes tax cuts, benefits sent directly to households and loans for small business.
Nordic stocks opened strongly with the market in Copenhagen leading the way with a gain of 4.73 percent. Oslo added 3.81 percent, Stockholm advanced 3.44 percent and Helsinki was up 1.65 percent.
Russia's RTS stock market shot up more than nine percent in the first hour of trading, after strong performances in Asia.
Shanghai closed 2.55 percent higher, Bangkok won 6.26 percent in value and Jakarta added 5.4 percent.
Gulf markets were mostly slightly higher in thin early trading with Kuwaiti shares rising for the first time this week.
As efforts continued to tackle the credit crunch, the International Monetary Fund created a new short-term liquidity facility for countries battered by the crisis.
The IMF executive board said the emergency tool was "to establish quick-disbursing financing for countries with strong economic policies that are facing temporary liquidity problems in the global capital markets."
In Wall Street action on Wednesday, the Dow Jones Industrial Average fell 0.85 percent in choppy trade.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
