World stocks rebound on China stimulus hopes

[March 04, 2009]  LONDON (AP) -- Stock markets in Europe and Asia rebounded Wednesday amid mounting hopes that China will soon announce a big stimulus package that could help limit the length and depth of the recession in the industrialized world.

A legislative meeting starts Thursday in China and top of the agenda is what the government can do to lift growth rates, which have fallen in the wake of the global economic downturn. As one of the few major economies still expanding, China is being closely watched amid hopes its demand and trade can help the world weather the most severe global slowdown in decades.

Chinese shares led Wednesday's advance, with Shanghai's index jumping more than 6 percent to close at 2,198.11.

"Obviously, this unusual rally suggests that investors are overly optimistic about what to expect from the legislature. They think the government will do more to boost spending to stimulate the economy," said Peng Yunliang, an analyst with Shanghai Securities in Shanghai.

Elsewhere in Asia, Japan's Nikkei 225 stock average was up 61.24 points, or 0.9 percent, to 7,290.96, while Hong Kong's Hang Seng added 297.27, or 2.5 percent, to 12,331.15. South Korea's Kospi climbed 3.3 percent to 1,059.26.

Markets in Singapore, Taiwan and New Zealand also gained. Australia's index shed 1.6 percent.

In Europe, the FTSE 100 index of leading British shares recovered from six-year lows to rise 66.42 points, or 1.9 percent, to 3,578.51, while Germany's DAX was up 99.38 points, or 2.7 percent, at 3,790.10. The CAC-40 in France was 54.05 points, or 2.1 percent, higher at 2,608.60.

U.S. futures pointed to a higher open for Wall Street on Wednesday. Dow futures rose 119, or 1.8 percent, to 6,788 and the broader Standard & Poor's 500 futures gained 14.3, or 2.1 percent, to 704. After a choppy session, the Dow closed Tuesday at 6,726.02, its lowest close since April 1997, while the S&P closed at 696.33, 52 percent below its peak of October 2007.

Despite Wednesday's rebound around the world, the markets remain in a jittery mood ahead of Thursday's interest rate decisions from the European Central Bank and the Bank of England and Friday's closely-watched U.S. jobs report for February.

"The mood in equity markets is still bleak but we need to be aware that sentiment-emotion is looking rather extreme, not that fundamentals look in any way supportive," said Neil Mackinnon, chief economist at ECU Group.

Sentiment around the world was ravaged this week with the news that American International Group Inc. posted the biggest quarterly loss in corporate history, and HSBC Holdings PLC slashed its dividend and revealed it needed to raise nearly $18 billion from shareholders. And the warning from Ben Bernanke, the U.S. Federal Reserve chairman, that U.S. banks may need more government cash injections to stay afloat did not help matters either.

Oil prices rose, with benchmark crude for April delivery up $1.62 to $43.27 a barrel on the New York Mercantile Exchange. The contract added $1.50 to settle at $41.65 overnight.

In currencies, the dollar fell rose 1.4 percent to 99.35 yen while the euro fell 0.4 percent to $1.2504.

[Associated Press; By PAN PYLAS]

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

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