World markets rally, led by Latam, Asia
LONDON — World stock markets were stronger Thursday led by sharp rallies in Asia and Latin America after the U.S. Federal Reserve said it would supply new lines of credit to Brazil, Mexico, South Korea and Singapore to help them deal with the global credit crisis.
Gains were more moderate in Europe, however, where focus appeared more set on U.S. data that showed the economy shrank in the third quarter.
But the Commerce Department's report that gross domestic product fell at an annual rate of 0.3 percent during July-September period was taken in stride on Wall Street, where the Dow industrials finished up 189.73, or 2.11 percent, to 9,180.69.
Asian markets started the day galloping higher, with Hong Kong's Hang Seng index leading the charge, up 12.8 percent at 14,329.85. South Korea's key stock index soared a record 12 percent to 1,084.72 and Japan's Nikkei 225 stock average gained 10 percent to 9,029.76 as exporters like Toyota and Sony got a boost from the ongoing fall in the value of the yen.
Elsewhere, benchmarks in Australia, Singapore, Taiwan and the Philippines added 4 percent or more. Russia's two main indices were also up sharply.
Hong Kong's de facto central bank followed the Fed's half-percentage point rate cut Wednesday by cutting its key lending by the same amount and Taiwan reduced its key interest rate by a quarter point. In Japan, speculation mounted that the central bank would cut its key rate, already at a low 0.5 percent, at a meeting Friday.
Before the Fed acted, China also lowered its rates by just over a quarter point. The Shanghai Composite index was up 2.9 percent.
Markets took heart from an announcement that the Fed would temporarily supply new lines of credit worth up to $30 billion to the central banks of South Korea, Brazil, Mexico and Singapore.
The International Monetary Fund also said Wednesday it is creating a new program to get money quickly to developing countries with strong economies that are facing cash crunches in the global financial crisis.
The news brought newfound optimism to Latin American markets after a weeklong plunge in stock values and currencies.
Brazil's Ibovespa index finished up 7.5 percent to 37,449, building on even stronger gains in the two previous sessions. Mexico's benchmark IPC index also jumped 5.5 percent to 20,207.
Argentina's Merval gained 6 percent at 974, Chile's IPSA rose 2.2 percent to 2,490 and Colombia's IGBC rose 3.2 percent to 7,179.
European markets closed only modestly higher. The FTSE 100 index of leading British shares closed 49.11 points, or 1.2 percent, higher at 4,291.65, having been more than 100 points up earlier. FTSE heavyweight stocks BP PLC and Royal Dutch Shell weighed on the index too after oil prices slumped $2.42 to $65.08.
France's CAC-40 ended up 5.25 points, or 0.2 percent, at 3,407.82.
Germany's DAX fared better than the others, helped by a 12 percent rise in the share price of Deutsche Bank AG, after it reported higher-than-expected third quarter profits. The DAX closed 60.61 points, or 1.3 percent, higher at 4,869.30.
Though a smaller-than-anticipated contraction in the U.S. economy _ economists had forecast GDP would shrink 0.5 percent _ in the third quarter drew a relief rally on Wall Street, a more detailed assessment of the quarter, in particular the news that consumer spending fell at its largest rate since 1980, reinforced underlying concerns about the health of the U.S. economy.
"The economy ended Q3 much weaker than it began, even before the most extreme turmoil in global financial markets erupted in October," said Nigel Gault, chief U.S. economist at IHS Global Insight.
"We are now entering the harshest part of the recession," he added.
The combination of lower global interest rates and attempts to stabilize emerging markets, had helped markets recover, but concerns about the global economy are never far from traders' minds.
"We are staring down the barrel of a major global recession and the growing probability of deflation," said John Higgins, an analyst at Capital Economics.
"This is not an environment in which equities or other risk-assets are likely to flourish relative to government bonds," he added.
In currencies, euro rose to $1.2967 in late Thursday trading in New York from $1.2852 late Wednesday, while the British pound rose to $1.6444 from $1.6314.
In the oil market, light, sweet crude for December delivery fell $1.54 to settle at $65.96 a barrel on the New York Mercantile Exchange. Oil prices have fallen 55 percent since peaking above $147 a barrel in mid-July.
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AP Business Writers Jeremiah Marquez in Hong Kong and Kelly Olsen in Soeul contributed to this report.
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PAN PYLAS | October 30, 2008 06:18 PM EST |
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