World markets extend rally amid cautious optimism

[March 16, 2009]  HONG KONG (AP) -- Asian stock markets advanced for a second day Monday, with Tokyo's index up nearly 2 percent, on cautious optimism that government efforts to heal the financial system will reinvigorate the flagging world economy. European markets opened higher.

Still, lackluster trade through most of Asia's session outside its two biggest markets -- Japan and Hong Kong -- reflected lingering uncertainty after a rally last week triggered by upbeat news about Citigroup and other top U.S. banks.

Confidence continued to show signs of improving Monday as Japanese financial stocks surged on reports the country's central bank may buy their subordinated loans and bonds to bolster their capital. In Europe, British lender Barclays PLC became the latest major bank to say it had a good start to 2009.

Helping easing fears about banks were promises over the weekend from finance ministers of Group 20 nations to do "whatever is necessary" to fix the global economy and restore a shaky financial sector still reeling from losses on bad assets. In the U.S., Federal Reserve Chairman Ben Bernanke said America had avoided a depression and its recession will probably end this year if the government succeeds in rehabilitating the banking system.

But sentiment was still fragile in many markets as traders waited to see whether Wall Street would extend its four-day rally. Investors also were anticipating announcements this week from the U.S. Federal Reserve and Treasury Department about the state of the world's largest economy and the government's bank bailout plan.

"Investors are happy to ride a bear market rally, but many are not fully confident that anything of significance has changed," said Kirby Daley, senior strategist at Newedge Group in Hong Kong.

Early going in Europe, Britain's FTSE 100 rose 1 percent, Germany's DAX added 1.8 percent and CAC-40 gained 2.4 percent.

Japan's Nikkei 225 stock average rose 134.87 points, or 1.8 percent, to 7,704.15, after vaulting more than 5 percent on Friday. Hong Kong's Hang Seng climbed 450.91, or about 3.6 percent, at 12,976.71.

In mainland China, Shanghai's main index clawed back from earlier losses to rise about 1 percent. Taiwan, Indian, Australia and Singapore stock measures also rose.

South Korea's benchmark was flat, while the Philippines' stock measure tumbled 4.7 percent.

But the region's optimism was clouded by another round of dismal figures about Asia's economies, hit hard by shrinking Western demand for their electronics, clothes and other exports amid the global downturn.

In Singapore, analysts slashed the country's economic forecasts for 2009 and said the city-state would suffer a severe recession, with gross domestic product shrinking 4.9 percent this year. Meanwhile, foreign direct investment in China dropped in February as companies battered by the financial crisis pulled back.

Trade was choppy in many markets but stabilized later in the day after U.S. stock index futures pointed to more gains on Wall Street. Dow futures were up 66 points, or 0.9 percent, to 7,298, while S&P 500 futures were up 8.9 points, or 1.2 percent, to 763.5.

Friday in New York, Wall Street finished with its biggest weekly advanced since November. The Dow Jones industrial average rose 53.92, or 0.8 percent, to 7,223.98, bringing its weekly gain to a stunning 9 percent. The Standard & Poor's 500 index rose 5.81, or 0.8 percent, to 756.55.

In Asian trade, financials posted strong gains across the region.

In Japan, megabanks like Sumitomo Mitsui Financial Group, Inc., up nearly 6 percent, surged on a report by the country's main business paper about the central bank's possible plan to buy the banks' loans and bonds to boost their capital.

European heavyweight HSBC, listed in Hong Kong, climbed 4.6 percent after its chief financial officer said the company would not need money from the British government.

Asia's major exporters also were higher, with Hyundai Motor gaining 3.3 percent in South Korea and electronics giant Canon Inc. up 4.8 percent on the back of a weaker yen. Resources firms, however, were hit by sinking oil prices.

In oil, crude prices fell near $44 a barrel in Asia on Monday after OPEC decided not to cut production levels at its meeting over the weekend in Vienna. Benchmark crude for April delivery was off $2.22 to $44.03 a barrel by midmorning in Singapore on the New York Mercantile Exchange.

In currencies, the dollar traded higher at 98.18 yen from 97.91 yen late Friday. The euro rose to $1.2971 from $1.2927.

[Associated Press; By JEREMIAH MARQUEZ]

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