World markets rise as bank stocks rebound

[January 22, 2009]  LONDON (AP) -- World stock markets rose Thursday as investors bought up what they saw as cheap bank stocks, which had fallen sharply in recent days on worries about steep losses amid the global financial crisis.

In a week that has seen Royal Bank of Scotland forecast the largest loss in British corporate history and governments move to bail out banks a second time, financial stocks had dived to alarming lows. Investors looking for bargains helped those stocks recover some losses on Thursday.

Britain's FTSE 100 benchmark index was 2.1 percent higher at 4,144.69 in European morning trade. Germany's DAX was likewise up 2.1 percent, at 4,350.71, while France's CAC 40 rose 2.0 percent at 2,964.08.

Those increases followed robust gains in Asia, where Japan's Nikkei 225 stock average rose 1.9 percent to 8,051.74 and Hong Kong's Hang Seng closed up 0.6 percent at 12,657.99.

Expectations were that Wall Street would pause after its rally Wednesday. Dow futures were down 28 points to 8,150 and S&P500 futures 4.40 points lower at 832.40.

Bank shares proved volatile, as the ravaging they suffered this week was given a respite Thursday, helped by the news that even some U.S. bank executives were buying their own companies' shares.

Barclays, whose stock price was halved since Friday on fears it could need a bailout and face part-nationalization, was up 5 percent. Royal Bank of Scotland was more than 9 percent higher. Shares in Germany's Commerzbank were up 13 percent, while Deutsche Bank rose 10 percent.

But Belgium's KBC, which Thursday received a euro2 billion state cash injection and has lost nearly 70 percent of its share value since the start of the year, remained weak, falling 12 percent.

"The day ahead is likely to be a battle between prospectively poor economic data and the relatively strong performance in equity markets overnight which were buoyed by bank executives' purchases of shares in their own banks and good results from Apple," said Daragh Maher, head of global forex strategy at Calyon in London.

Apple's announcement of record earnings on Wednesday -- following an upbeat report by IBM -- helped markets overnight and assuaged spreading fears over world economic growth. The Dow Jones industrial average rose 3.5 percent to 8,228.10, while the Standard & Poor's 500 index rose 4.4 percent to 840.24.

The Obama administration's upcoming measures to boost the world's largest economy were also in focus overnight. Treasury Secretary-designate Timothy Geithner told lawmakers that passing the stimulus plan was essential.

But the outlook for the global economy remains bleak. Germany on Wednesday said economic growth this year could easily shrink by the most since since World War II, and many governments were forced to announce a new round of bank rescue measures.

Investors were keeping a close eye on Nokia shares, which said profits fell 69 percent in the fourth quarter, after Sony Corp. announced it would record its first net loss in 14 years on slumping sales, a strong yen and restructuring costs.

China's economic slump deepened in the fourth quarter, with growth sliding to a seven-year low of 6.8 percent from 9 percent the previous quarter. For the full year, China's economy expanded by 9 percent -- its slowest yearly growth since 2001.

In Japan, exports plunged at a record pace of 35 percent in December, marking a third straight month of decline, the government reported.

The data, worse than many expectations, together highlighted the damage being inflicted on Asia as demand for cars, electronics, clothes and other goods evaporates in the U.S. and Europe, among the hardest hit regions in the downturn.

"Clearly our region is really plunging into a steep recession," said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong. "We are going through a big slowdown."

Asian governments have been scrambling to prop up their economies, slashing interest rates and rolling out massive spending plans. Japan's central bank, while Thursday holding its key interest rate at 0.1 percent, said it would "examine" outright purchases of corporate bonds in the future to help capital-starved companies.

Oil prices, which have moved in tandem with equities in recent months, rose in European trade, with light, sweet crude for March delivery inching up 88 cents at $44.43 a barrel. The contract jumped $2.71 overnight to settle at $43.55 a barrel on the New York Stock Exchange.

In currencies, the dollar weakened to 88.88 yen, down from 89.13 yen, and the euro rose to $1.3013 compared to $1.3009. The pound remained weak, at $1.3812, just above the 24-year lows reached Wednesday.

[Associated Press; By CARLO PIOVANO]

AP reporters Jeremiah Marquez in Hong Kong, Joe McDonald in Beijing and Tomoko A. Hosaka in Tokyo contributed to this report.

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