World markets surge ahead of US bank crisis plan

[March 23, 2009]  HONG KONG (AP) -- World stock markets soared Monday ahead of a U.S. announcement to purge as much as $1 trillion in toxic bank assets and as Japan signaled more stimulus measures to resuscitate the world's second-largest economy.

Tokyo shares helped lead Asia's gains, with the country's benchmark hitting a two-month high, after Japan's finance minister said aggressive public spending to the tune 20 trillion yen ($208 billion) might be needed to end the country's painful recession.

But investors were largely cheered by the Obama administration's newest effort to heal the hard-hit financial sector and restore bank and consumer lending. The program, to be unveiled later Monday, involves creating a new government entity to clear from bank balance sheets up to $1 trillion in souring securities and loans at the root of the current crisis.

The initiative seeks to enlist private investors by offering billions of dollars in low-interest loans and sharing certain risks, and is just the latest in an unprecedented effort by major governments to stem the worst global downturn in decades.

"Simply hoping for banks to work these assets off over time risks prolonging the crisis," U.S. Treasury Secretary Timothy Geithner wrote in an opinion piece in Monday's Wall Street Journal.

The market's mood was shadowed by questions about whether enough private investors would participate and how the banks' highly illiquid assets would be priced. But for now, news of the bailout helped re-energized a global rally that started two weeks ago on signs of improvement in the financial system.

"It's becoming difficult to remain bearish," said Desmond Tjiang, chief investment officer, who helps manage $3 billion in Asian equities at Fortis Investment Management in Hong Kong. "The governments have definitely helped ... and people are still hoping for a second-half recovery."

Europe followed Asia's lead in early trade as major benchmarks in Britain, Germany and France climbed between 1 and 2 percent. U.S. futures also were boosted by Monday's pending announcement about the government's bank plan, with Dow futures adding 43 points, or 0.6 percent, to 7,454 and S&P 500 futures gaining 21.9 points, or 2.9 percent, to 786.

Asian markets resumed their two-week advance after ending mixed Friday.

Tokyo's Nikkei 225 stock average surged 269.57 points, or 3.4 percent, to 8,215.53 as a weaker yen also boosted sentiment. Hong Kong's Hang Seng jumped 613.91, or 4.8 percent, 13,447.42, and South Korea's Kospi climbed 2.4 percent to 1,199.50.

Elsewhere, Shanghai's key index added 2 percent to 2,325.48 on higher commodity prices. Australia's benchmark gained 2.4 percent, while India's Sensex climbed 4.6 percent to 9,378.27.

Banks were especially strong across the region, with Japan's Sumitomo Mitsui Financial Group Inc. jumping 7.3 percent and Mizuho Financial Group Inc. up 5.3 percent. China Construction Bank surged 7 percent in Hong Kong.

Higher oil and commodity prices lifted Australian mining giant BHP Billiton Ltd, which rose 3.5 percent. Benchmark crude for May delivery gained 72 cents at $52.79 a barrel in Asian trade.

Friday in New York, Wall Street's took breather without any significant news to reinforce its recent rally. The Dow Jones industrial average fell 122.42, or 1.7 percent, to 7,278.38. Broader stock indicators also lost ground, with the Standard & Poor's 500 off 15.50, or 2 percent, to 768.54.

In currencies, the dollar rose to 96.38 yen from 95.95 yen late Friday. The euro was higher at $1.3644 from $1.3582.

[Associated Press; By JEREMIAH MARQUEZ]

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