Stock Markets Recovering

Oct 13 2008

Japan’s stock market soared in early trading Tuesday, leading a second-day rally in Asian stocks after Wall Street staged a dramatic comeback from its worst week ever.

Sparked by global efforts to fix the world’s crippled financial system, Tokyo’s benchmark Nikkei 225 index jumped 1,079 points, or 13 per cent, to 9,355. The Japanese financial markets were playing catch-up because they were closed Monday for a public holiday.

In Australia, the S&P/ASX200 index traded more than five per cent higher after the government announced plans to inject $10.4 billion Australian ($8.4 billion Cdn) to strengthen the country’s economy.

Markets in South Korea, Singapore, New Zealand and Taiwan also climbed five per cent or more.

The advance came after the Dow Jones industrial averages on Monday jumped more than 930 points, its biggest single-day point gain yet.

Traders reacted with relief to moves by the U.S. government to inject capital into major banks and get lending flowing again among companies. That followed signals that European governments were putting up nearly $2 trillion to safeguard their own banks.

“The governments are ensuring that no matter what happens, they’re not going to allow another major institution to fail,” said Nicole Sze, an investment analyst at asset manager Bank Julius Baer & Co. in Singapore. “…You’re seeing a reversal of the panic selling, and we think a temporary bottom has been found.”

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U.S. stock indexes closed up more than 11 per cent Monday as governments around the world committed trillions to easing the global credit freeze.

The Dow Jones industrial average was up more than 936.42 points, or 11.1 per cent, at 9,387.61

It was the Dow’s biggest single-day point gain yet, a stunning turnaround after its worst week on record. The blue-chip index recovered nearly half of the 1,874 points it lost last week.

The Nasdaq composite closed up 11.8 per cent and the S&P 500 advanced 11.6 per cent.

Canadian markets were closed Monday for Thanksgiving.

The U.S. markets were responding to injections of billions of taxpayer dollars, pounds and euros into the Western world’s leading banks.

European governments — Britain, Germany, France, Spain, the Netherlands, Austria and Portugal — have committed up to $2.3 trillion to support banks.

The British government said Monday it will inject nearly $75 billion into three of the country’s largest banks to prevent the institutions from collapsing. The move means the government is effectively taking over the Royal Bank of Scotland and will also hold a large share of Lloyds/TSB and the Halifax Bank of Scotland, Prime Minister Gordon Brown said.

A German government spokesman said Monday that Berlin had put together a package worth $780 billion to provide fresh capital for banks, guarantee loans between banks and cover potential losses.

In the U.S., the government is working on its $700-billion US financial rescue plan, consulting with six private law firms to determine the best way to buy stakes in a number of banks.

The plan to buy shares, announced by Treasury Secretary Henry Paulson late Friday, is intended to get capital quickly into financial institutions. It’s seen as a faster way to do that than the original plan, which involved buying bad mortgage-related derivatives.

The European countries and the U.S. are trying to get capital into banks quickly so they will start lending again, providing credit to people and companies on which the economy depends. The freeze in lending, the result of banks’ fears that they won’t be repaid, could tip the Western economies — and the world — into a recession.

Stock prices also rebounded in Europe and Asia on Monday after a week that saw huge losses on markets all over the world.

Hong Kong’s Hang Seng index jumped 10.2 per cent Monday. Britain’s FTSE 100 was up 8.3 per cent, Germany’s DAX 11.4 per cent and France’s CAC-40 11.2 per cent.

Japanese markets were closed for a holiday.

Source

Markets fight back around the world

October14 2008

London’s leading share index jumped more than 4 per cent today as markets continued to rally in the wake of efforts to shore up the global financial system.

The FTSE 100 Index was up more than 190 point after an hour, with the banks taking part in the Government’s £37 billion rescue plan clawing back some hefty losses seen yesterday.

Royal Bank of Scotland, which is in line to receive £20 billion, was up 12 per cent, while merger partners HBOS and Lloyds TSB were up 11 per cent and 7 per cent respectively.

Trading was boosted by surging global markets overnight as investors cheered co-ordinated efforts to stabilise the financial sector.

Japan’s Nikkei 225 soared 14 per cent, its biggest one day rise, while New York’s Dow Jones Industrial Average jumped 11 per cent, the index’s biggest daily jump since the Great Depression.

Australian shares finished up 3.7 per cent in the wake of a government package was announced to boost the economy via one-off cash hand-outs to families and pensioners.

In Hong Kong, shares rose 3.2 per cent. The benchmark Hang Seng Index closed 520 points higher at 16,832, after earlier soaring to 17,141.

In London, energy-facing stocks were making good progress as oil prices ticked up on commodity markets. BP was nearly 7 per cent up, with rival Royal Dutch Shell 6 per cent higher.

Retailers were also edging ahead despite data from the high street showing like-for-like sales fell 1.5 per cent in September.

Marks & Spencer was up more than 1 per cent, with Sainsbury’s enjoying a 3 per cent rise.

There were mixed fortunes for Barclays and HSBC, two banks not turning to the Government for extra funds. Barclays was 6 per cent higher while First Direct owner HSBC was steady.

ETX Capital broker Manoj Ladwa said: “Everyone is relieved that the market is up.

“We have probably seen the short-term lows in the market, with some of the volatility also calming down.

“After the recent falls, some of the stocks out there do look fairly interesting now.”

European indices were also firmly on the front foot, with Germany’s Dax up nearly 4 per cent, and France’s CAC 40 also up 4.6 per cent.

European governments have said they are allocating more than 1 trillion euro (£780bn) to protect the region’s banks through guarantees and other emergency measures.

So far Germany has approved a bank rescue plan worth up to 500 billion euro (£391bn), with France spending about 350 billion euros (£273bn).

The US is also expected to unveil details of a plan to take stakes in banks, following steps by the UK and European leaders.

Yesterday executives from leading US banks were summoned by the Bush administration to Washington to work out a plan to get loans moving again

London’s Footsie leapt more than 8 per cent yesterday, its second biggest one-day gain, as investors digested the banking rescue package.

Shares in RBS, HBOS and Lloyds TSB – in which the Government is set to be a major shareholder – fell heavily despite the surge as investors faced the prospect of seeing their stakes diluted. The banks will also not be paying any dividends until their taxpayer loans are repaid.

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Published in: on October 14, 2008 at 7:04 am  Comments Off on Stock Markets Recovering  
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