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Asia stocks jump on US auto rescue, stimulus

(Agencies)
Updated: 2008-12-08 15:27

Asian stocks jumped to a three-week high on Monday, with investors taking heart from a rescue plan for US automakers, falling oil prices and more government stimulus measures to limit the economic damage from the credit crisis.

Shares in Hong Kong surged 7.5 percent after a report that senior Chinese economic officials were meeting this week stirred speculation that more stimulus measures were on the way.

Financial bookmakers called for a surge of about 5 percent in Britain's FTSE and Germany's DAX, which missed out on Wall Street's late-day rally on Friday.

Oil prices rose around 6 percent to $43.21, but the plunge to a four-year low near $40 a barrel is expected to provide some relief to the bleak landscape of tightening credit and mounting layoffs.

The dollar slipped as stocks posted gains despite Friday's dismal US employment report showing 533,000 jobs were lost in November, the most in 34 years and one of the biggest drops ever in the government data.

Wall Street's surge, led by retail shares, suggested some investors believe the worst may be over after the plunge in stocks this year and a rush to safe-haven bonds that has driven benchmark US Treasury yields to half-century lows.

But plenty of investors remain sceptical about outlook, since the financial crisis has only just started taking its full toll on the global economy.

A survey released Monday showed confidence among Japanese service sector workers fell further in November to a record low.

"There still will be more downside movements in Asian markets," said Dariusz Kowalczyk, chief investment strategist at CMC Seymour in Hong Kong, adding that shrinking trade surpluses in the region should hurt corporate earnings and equities.

The MSCI index of Asia-Pacific stocks outside Japan surged 6.5 percent, poised for its biggest daily rise in six weeks. But the index remains down 56 percent on the year as 2008 comes to a close.

Japan's Nikkei average pushed up 5.2 percent, with machinery maker Komatsu soaring 11 percent on the global stimulus plans being launched. The Nikkei outpaced the 3.7 percent rise in the US S&P 500 on Friday.

"There's a sense that perhaps Japanese shares had fallen too much," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

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Around the world, policymakers kept up their efforts to revive their economies.

US president-elect Barack Obama said over the weekend that he plans the biggest increase in infrastructure investment since the 1950s with the goal of creating at least 2.5 million jobs.

India launched $4 billion of extra spending to support the economy, while Xinhua news agency reported that Chinese economic leaders were meeting this week on ways to keep growth above 8 percent. Australia started sending cheques to families and pensioners under a stimulus plan announced in October.

Also over the weekend, the White House and congressional negotiators sought to resolve the remaining difficulties over an emergency rescue for the ailing US car industry.

Many markets have shuffled sideways in the past several weeks despite the relentless array of bleak news, giving some analysts reasons to think the worst may be over after central banks slashed interest rates and authorities put together spending packages to revive growth.

As stock indexes have found their footing, the dollar and yen have slipped as investors tip-toe back into the euro and higher-yielding currencies that have been battered throughout the crisis on expectations for aggressive rate cuts.

The euro rose 0.7 percent to 118.93 yen, helping lift the single currency 0.6 percent to $1.2800. The dollar index, a gauge of its performance against six major currencies, dropped 0.6 percent 86.417.

Battered emerging market currencies staged a recovery, with the South Korean won up about 2 percent.

Safe-haven US Treasuries succumbed on the improvement in risk-taking. March 10-year Treasury futures fell a half point to 122-17/32. The 10-year Treasury note was flat in price to yield 2.724 percent, up from a five-decade low of 2.510 percent hit on Friday.