Stocks higher after G-7 pledge to restrain yen

[March 18, 2011]  LONDON (AP) -- Global stocks rose Friday after the world's seven leading industrial nations pledged to rein in the Japanese yen, whose surge to record highs this week was hurting a country already brought to its knees by natural disasters.

Investors were encouraged by the coordinated effort to stabilize financial markets, which have been volatile since Japan was struck March 11 by a mammoth earthquake and tsunami that wiped out much of its industrial northeast and severely damaged a nuclear power plant.

The yen raced to record highs against the dollar due to its status as a safe haven for investors -- even when the emergency is in Japan -- and expected repatriation of funds for reconstruction.

The yen's rise was further hurting Japan's export-dependent economy by making its foreign sales less competitive, so much that the world's largest central banks joined forces to intervene in currency markets to bring it back down.

As a result, the benchmark Nikkei 225 in Tokyo rose 2.7 percent to close at 9,206.75, capping a turbulent week that saw stocks lose 16 percent over Monday and Tuesday.

In Europe, Britain's FTSE 100 rose 0.5 percent to 5,723.14. Germany's DAX was 0.5 percent higher at 6,691.58 and France's CAC-40 rose 0.7 percent to 3,812.07. The euro rose to $1.4055 from $1.4030 late Thursday.

Wall Street was poised to gain, with Dow Jones futures up 0.7 percent to 11,789 and S&P 500 futures up 0.6 percent to 1,277.

The G-7 coordinated currency intervention marks the first time the G-7 countries have jointly acted in currency markets since the fall of 2000, when they supported the fledgling euro.

The impact was immediate -- the dollar rose to 81.39 yen after the announcement from 78.97 yen hours before. It had earlier dropped as far as 76.53 yen, an all time low for the dollar against the yen.

Analysts noted that the G-7 left the door open for more interventions, as required by market volatility, suggesting a longer-term commitment to keeping the yen down.

Gareth Berry, analyst at UBS, noted that while the size of the intervention was not revealed it is likely to be significant. The Bank of Japan's unilateral intervention in September was worth $25 billion on its own.

Meanwhile, market reaction was mixed to the news that the U.N. authorized military action and a no-fly zone over Libya to prevent its leader, Moammar Gadhafi, from crushing a rebel movement.

The instability in the Middle East had been eclipsed in the last week by the headlines on Japan, but investors remain on edge about its potential fallout. Whereas some fear the U.N. move could heighten violence, some experts also see it as a step toward solving Libya's protracted crisis.

"Market participants will closely follow headline and event risk and we anticipate difficult trading conditions throughout all Friday sessions," Berry said.

Investors' mixed feelings were evident in the rise in oil prices, suggesting fears that violence in the OPEC nation could shake the broader oil-rich region. Benchmark crude for April delivery was up $1.27 at $102.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract added $3.44 to settle at $101.42 on Thursday.

Oil fell below $97 earlier this week on concerns that the earthquake in Japan would crimp crude demand as its economy struggles to recover.

Elsewhere in Asia, indexes ended higher. The Shanghai Composite Index rose 0.3 percent to 2,906.89 while the Shenzhen Composite Index for China's second, smaller exchange gained 0.6 percent to 1,292.93.

Shares in salt companies fell after surging the day before when consumers hoarded salt in Beijing and elsewhere in the false belief that it can guard against radiation exposure. Any fallout from the crippled Japanese nuclear power plant is extremely unlikely to reach China. Yunnan Salt & Chemical Industry Co. Ltd., which rose 10 percent on Thursday, lost most of those gains -- nearly 8 percent -- on Friday.

Hong Kong's Hang Seng rose marginally to 22,300.23 and South Korea's Kospi was up 1.1 percent to 1,981.13. Benchmarks in Singapore, Taiwan, New Zealand and Indonesia were also up, while Australia's S&P/ASX 200 dropped 0.1 percent to 4,555.30.

Asian indexes were helped by gains on Wall Street the previous day, when data suggested the U.S. economy is improving.

A gauge of manufacturing in the mid-Atlantic region jumped in February to the highest point since January 1984. The survey from the Federal Reserve's Philadelphia branch showed new orders soared. Production at U.S. factories, mines and utilities dipped last month but was higher in previous months than first estimated.

The U.S. Labor Department reported that the number of people applying for unemployment benefits fell more than economists expected last week. Ongoing claims dropped to the lowest level since October 2008.

[Associated Press; By CARLO PIOVANO]

Pamela Sampson in Bangkok contributed to this report.

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