World markets rise but sentiment remains fragile

[February 19, 2009]  LONDON (AP) -- European and Asian markets rose modestly Thursday following the previous session's gains on Wall Street but optimism remained very thin on the ground despite policy measures by governments around the world.

The FTSE 100 index of leading British shares was up 22.47 points, or 0.6 percent, at 4,029.30, while Germany's DAX was 34.88 points, or 0.8 percent, higher at 4,239.84. The CAC-40 in France rose 8.91 points, or 0.3 percent, to 2,882.98.

Earlier, Tokyo's Nikkei 225 stock average closed up 23.21 points, or 0.3 percent, at 7,557.65, while Hong Kong's Hang Seng finished 0.1 percent higher at 13,023.36.

The gains in Europe and Asia came after Wall Street closed modestly higher Wednesday in the wake of the latest policy initiative from President Barack Obama, who unveiled a $75 billion package of measures to breathe life back into the U.S. housing market, considered by many to be the main reason why the world economy is in the doldrums.

"Another day, another initiative. This is how it sometimes feels, and it is perhaps no surprise that markets are becoming a bit exhausted at trying to discern the impact of whatever the latest announcement, policy or program might be," said Daragh Maher, an analyst at Calyon Credit Agricole.

The housing package came in the wake of the president's signing of the $787 billion stimulus bill and U.S. Treasury Secretary Tim Geithner's bank rescue plan, which could see up to $2 trillion ploughed into the financial system.

The gnawing fear that has gripped markets over the last week or so is that whatever the Obama administration or other governments around the world do, nothing can stop 2009 being the worst year for the global economy in generations.

So far, the evidence suggests that the raft of measures enacted by governments around the world have done little, if anything, to lift confidence.

Overnight, the central banks of the U.S. and Japan painted grim pictures of their respective economies.

The Bank of Japan warned conditions in the world's second-largest economy were unlikely to improve anytime soon. That warning came in the wake of the news that the Japanese economy contracted by a massive 3.3 percent in the last three months of 2008 from the previous three-month period, its worst performance since the mid-1970s.

The Bank of Japan kept its key interest rate on hold at 0.1 percent, as expected, and extended several emergency measures to increase liquidity, including its operation to buy corporate bonds from firms to help ease the funding crunch.

Meanwhile, the U.S. Federal Reserve warned that the U.S. economy was in an even worse state than thought and predicted it would deteriorate throughout 2009, with no sign that the housing market will stabilize. The Fed's bleak estimates indicated that unemployment could climb as high as 8.8 percent this year and that the economy would contract for a full calendar year for the first time since 1991.

And in Europe, worries about the 16-nation euro zone and the emerging economies of Eastern Europe continue to weigh on sentiment.

One bright spot in Europe was the news that Nestle AG, the Swiss food and drinks giant, saw net profit rise 69 percent in 2009 and that it was planning to raise its dividend this year despite expectations of moderating sales growth in 2009.

U.S. stock futures were up, suggesting modest gains when Wall Street opens Thursday. Dow futures rose 69, or 0.9 percent, to 7,552, while the broader Standard & Poor's 500 futures gained 8.8, or 1.1 percent, to 788.

Both indexes though remain perilously close to November's multi-year lows of 7,552 and 752 respectively, a further indication as to how sentiment in the markets remains fragile.

Elsewhere in Asia, Shanghai's benchmark was up 0.9 percent in a choppy session. Markets in Australia, India and Taiwan were higher as well. But South Korea's Kospi lost 0.6 percent to 1,107.10.

In oil, light, sweet crude for March delivery gained $1.48 to $36.10 a barrel in electronic trading on the New York Mercantile Exchange. The March contract expires on Friday, and most of the trading was for the April contract.

In currencies, the dollar weakened 0.1 percent to 93.62 yen while the euro was 1.1 percent firmer at $1.2667.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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