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.

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Markets fight back around the world

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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Asian stocks plunge on fears of global recession

An investor points at the stock price monitor at a private security company in Shanghai, China on Tuesday, Oct. 7, 2008. (AP / Eugene Hoshiko)

Oct. 8 2008

The Associated Press

TOKYO — A meltdown in confidence strangled Asian stock markets Wednesday on accelerating fears that the widening financial crisis could spawn a global recession.

After a miserable day on Wall Street when the Dow Jones industrials lost more than 500 points, investors from Tokyo to Mumbai, Seoul to Sydney dumped shares in a broad regional sell-off.

Anxious investors in Tokyo sent shares into a free-fall, with the benchmark Nikkei 225 stock average plunging 9.4 percent — its biggest drop in 21 years — to 9,203.32, a five-year low.

“Selling on Wall Street triggered further selling in Tokyo. It’s like a chain reaction,” said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. Ltd. “No one knows the bottom of the ongoing financial crisis, and investors were really spooked by growing uncertainty over the global credit crisis.”

Accelerating the pessimism were doubts that finance ministers and central bankers from the Group of Seven nations would unveil any effective measures at their meeting in Washington Friday.

Indonesian authorities shut down trading for the day on the country’s exchange after the key index plunged more than 10 percent, driven by huge losses in commodities stocks. Investors dismissed comments by the central bank governor Tuesday that Indonesia will avoid the worst of the global credit crisis. They also reacted negatively to a quarter-point rate hike announced Tuesday to rein in inflation.

“What is happening is panic selling to an extent that it is irrational,” said Irvin Patmadiwiria, the head of investments at PT Lautan Dana Investment Management in Jakarta.

Hong Kong’s de factor central bank said it would slash its benchmark interest rate by 1 percentage point to 2.5 percent to help ease the credit crunch.

The move by the Hong Kong Monetary Authority, effective Thursday, is a break from the territory’s traditional pattern of closely tracking the U.S. Federal Funds target rate, now at 2 percent. The HKMA revised its formula for calculating its base rate from 150 basis points above the prevailing U.S. fed funds rate to 50 basis points.

“One has to do extraordinary things at extraordinary moments,” said Jacky Choi, a Hong Kong-based fund manager at Value Partners Ltd., which manages about $5 billion in Asia.

Russian news agencies say Moscow’s MICEX stock exchange, where most of Russia’s trading takes place, has shut until Friday after losing more than 14 percent in the first half-hour of trading Wednesday.

It was a brutal day across Asia.

Hong Kong’s blue chip Hang Seng index shed 5.2 percent, and India’s Sensex sank 4.3 percent. Seoul’s Kospi lost 5.8 percent, Taiwan’s key index fell 5.8 percent, and Singapore’s benchmark tumbled 5.5 percent.

Australia’s benchmark S&P/ASX200 closed down 5 percent, wiping out gains Tuesday after the country’s central bank cut its key interest rate by a bigger-than-expected 1 percentage point.

“People are very, very nervous that Europe will get belted tonight as they didn’t see a lot of the late losses in the U.S. session, and people just think it’s going to get worse,” said Ric Klusman, an institutional dealer with Aequs Securities in Sydney.

In New York Tuesday, the Dow lost more than 5 percent despite efforts by the Federal Reserve to reinvigorate the dormant credit markets by invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.

Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.

The downturn bodes ill for major Asian exporters dependent on the U.S. for a big chunk of their business.

Shares of Toyota Motor Corp. plunged 11.6 percent Wednesday, as investors recoiled on reports that operating profit at Japan’s top automaker would fall 40 percent this fiscal year through March.

The automaker’s operating profit is expected to total about 1.3 trillion yen ($12.8 billion), short of the 1.6 trillion yen forecast ($15.8 billion), according to the Nikkei financial daily. It may also miss its global sales target of 9.5 million units this year, the paper said.

Other Japanese carmakers were also dragged down on the news, as well as a wilting dollar. Honda Motor Co. lost 10.3 percent, and Nissan Motor Co. was off 9.9 percent.

In currencies, the dollar briefly fell below 100 yen for the first time in six months. It sank as low as 99.58 yen and was trading at 100.45 yen Wednesday afternoon in Asia. The euro gained to $1.3652 compared with $1.3550.

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