World markets mostly higher after Fed's $1.2T plan

[March 19, 2009]  HONG KONG (AP) -- World stock markets were mostly higher Thursday on guarded optimism the U.S. Federal Reserve's $1.2 trillion spending plan would bring a quicker end to the worst global slowdown in decades. But Japanese exporters got whacked as the dollar tumbled against the yen.

Most of Asia's other markets posted small gains, further buoyed after Wall Street gained for a sixth time in seven days on the Fed's surprise move. Commodity firms helped lead the way on stronger prices for crude and metals, while select banks also advanced.

The U.S. central bank said Wednesday it would pump more than $1 trillion into the economy with plans to buy up to $300 billion long-term government bonds and some $750 billion in mortgage-backed securities, which would help revive the country's sagging housing market.

The measures -- aimed at propping up demand and spending in the U.S. by driving down borrowing costs for consumers and companies alike -- stunned investors around the world. The Fed hasn't set out to influence long-term interest rates by buying long-term bonds since the 1960s.

But while anything to support Western demand might help Asia's export-reliant economies, analysts worried the ambitious scope of the Fed's plans could signal U.S. economic prospects are even worse that originally thought.

"I think the desperate measures are a reflection of desperate times," said Ben Pedley, Hong Kong-based managing director of LGT Investment Management Ltd., part of a European-based asset manager that administers some $81 billion.

"The fact that the Fed is taking these extraordinary measures may actually be a sign of just how bad things are to come in the U.S., and that's bad news for Asia and Asia's exporters," he said.

Lingering anxiety about the U.S. economy and the central bank's plan was underscored in three of Asia's leading markets.

In Tokyo, the Nikkei 225 stock average lost 26.21 points, or 0.3 percent, to 7,945.96 as the Fed's action weighed on the dollar and pulled back exporters like Toyota and Honda. Hong Kong's Hang Seng gained 13.75, or 0.1 percent, to 13,130.92, in up-and-down trade, but South Korea's Kospi closed down 0.7 percent at 1,161.81.

Mainland China's Shanghai index rose almost 2 percent, while benchmarks in Australia, India, Singapore, Malaysia and Thailand all advanced.

As trading opened in Europe, Britain's FTSE 100 added 0.7 percent, Germany's DAX gained 1.1 percent and France's CAC-40 climbed 0.9 percent.

The dollar's drop against the yen hit Japan's stock market as investors bet the Fed's plan would expand dramatically the money supply and stoke inflation. The dollar fell to 95.72 yen from nearly 99 yen the day before. The euro was higher at $1.3505.

Honda shed 3 percent and Toyota was off 2.2 percent. A stronger yen erodes exporters' income from overseas sales.

Select financials outperformed the broader Tokyo market, with megabank Sumitomo Mitsui Financial Group jumping 5.4 percent.

In Hong Kong, shares of Chinese juice maker Huiyuan Juice Group Ltd. tanked 42 percent after regulators rejected Coca-Cola Co.'s $2.5 billion bid for the company. HSBC Holdings PLC, Europe's biggest bank, shed 2.8 percent after launching its rights issue this week to raise capital.

On Wednesday, the Dow Jones industrial average rose 90.88, or 1.2 percent, to 7,486.58. The Standard & Poor's 500 index added 16.23, or 2.1 percent, to 794.35, and the Nasdaq composite index rose 29.11, or 2 percent, to 1,491.22.

U.S. stock index futures slid, pointing to a lower open on Wall Street Thursday. Dow futures were down 35 points, or 0.5 percent, while S&P futures were down 4.4 points, or 0.6 percent.

Oil prices recovered in Asian trade, with benchmark crude for April delivery up $1.06 at $49.20 a barrel. On Wednesday, the contract fell $1.02 to settle at $48.14 on a government report showing that U.S. crude and gasoline inventories are bulging with surplus supply.

[Associated Press; By JEREMIAH MARQUEZ]

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