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Asian stocks soar after US rally; Nikkei up 13%
(Agencies)
Updated: 2008-10-14 11:26 Despite Monday's sharp share price gains, investors remain skeptical that the stock markets are out of the woods. It's too early to tell if the banking measures outlined Monday will actually work or how the recent carnage in financial markets will play out in the global economy.
"I'm not convinced yet. It's a bit of a waiting game," said David Jones, chief markets strategist at IG Index. The latest coordinated move emerged before European trading began, when top central banks, including the US Federal Reserve and the European Central Bankm, unveiled new measures to thaw frozen credit markets and bolster funding to banks. They joined the Bank of England and the Swiss National Bank in saying they would provide unlimited US dollar funds to financial institutions. The Bank of Japan said it was considering similar measures. The banks' action came after leaders of the 15 countries using the euro said Sunday they would guarantee new bank debt until the end of 2009, allow governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization. The key is whether the flurry of activity can actually ease conditions in the credit markets. Despite the coordinated interest rate reductions announced last Wednesday, and massive liquidity boosts, the rates at which banks lend to each other continued to rise. That means banks were afraid to lend to each other, and raises the chance that they and other businesses won't get the credit they need to operate. The London interbank offered rate, or Libor, for three-month dollar loans fell 0.07 percent to 4.75 percent, while the similar rate in euros, or Euribor, dipped only 0.063 to 5.318 percent. The rate remains well above the euro zone's benchmark rate of 3.75 percent set by the ECB, meaning the credit freeze is far over. Usually Euribor is much closer to the ECB rate. "There's been nothing dramatic but there are some modest improvements in rates and spreads," said Neil Mackinnon, chief economist at ECU Group. Latin America shares have been hammered by the recent global sell-off, but rebounded sharply on Monday. Brazil's Ibovespa stock index rose 14.7 percent to close at 40,829, regaining ground after losing 20 percent of its value last week. Mexico's IPC index meanwhile gained 11 percent to close at 22,096, while Chile's benchmark IPSA index jumped 12.5 percent to 2,364 and Peru's IGBVL index rose 13.7 percent to 8,668. Exchanges in Argentina and Colombia were closed for a national holiday. |
