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Asian stock markets gain, gold hits new record

Asian stock markets advanced on Wednesday after mostly positive US economic figures boosted confidence in the recovery and as gold surged to another new record.

business Updated: Dec 02, 2009 16:29 IST

Asian stock markets advanced on Wednesday after mostly positive US economic figures boosted confidence in the recovery and as gold surged to another new record. The worries of new financial turmoil that swept global stocks last week were largely forgotten as markets decided Dubai's debt problems would not spread beyond the Middle East. Tokyo shares extended gains from Tuesday when the central bank announced new measures to boost the stumbling Japanese economy while other major benchmarks rose about 1 per cent or more.

Oil prices hung above $78 after a big jump overnight and gold, which on Tuesday broke above $1,200 an ounce for the first time amid weakness in the dollar, surged to a new record of $1,216.90. US economic figures also gave investors a reason to enter the markets after last week's sell-off.

The Institute for Supply Management, a trade group, said overall manufacturing activity grew at a slower pace in November but that new orders rose, suggesting activity could pick up in the coming months.

Meanwhile, the National Association of Realtors said its reading on pending home sales rose in October to the strongest level since March 2006. Economists had expected pending sales to fall. In Japan, the Nikkei 225 stock average was up 19.17 points, or 0.2 per cent, at 9,596.07 after leaping 2.4 per cent the day before on news of an unscheduled Bank of Japan board meeting. After the market closed the board announced it would offer $116 billion of cheap, short-term loans to commercial banks to boost liquidity. Hong Kong's Hang Seng gained 283.12, or 1.3 per cent, to 22,396.27 and South Korea's Kospi jumped 22.02, or 1.4 per cent, to 1,591.85. Australia's benchmark advanced 0.9 percent and China's Shanghai index climbed 1.1 per cent.

Asian markets have rallied powerfully from their lows in March, boosted by the unprecedented liquidity released by central banks and hopes a recovery from the global recession was underway. China's Shanghai benchmark and India's Sensex are both up a massive 78 percent so far this year while Indonesia's key index has vaulted nearly 81 per cent.

There have been constant doubts, however, about the markets getting ahead of the economy. The scare last week, when government investment arm Dubai World delayed payments on $60 billion in debts, was a reminder that the global recovery remains vulnerable to new shocks.

In the US on Tuesday, the Dow rose 126.74, or 1.2 per cent, to 10,471.58, its highest close since October last year. It rose as high as 10,501.28 during trading, the first time it's topped the psychological barrier of 10,500 in 14 months.

The broader Standard & Poor's 500 index gained 13.23, or 1.2 percent, to 1,108.86, while the Nasdaq composite index rose 31.21, or 1.5 per cent, to 2,175.81.

Oil prices hovered above $78 a barrel in Asia despite US crude supplies unexpectedly rising, which suggested demand in the world's largest economy remains weak.

Benchmark crude for January delivery was up 5 cents at $78.37 in electronic trading on the New York Mercantile Exchange. The contract rose $1.09 to settle at $78.37 on Monday.

In currencies, the dollar rose to 87.01 yen from 86.71 yen. The euro rose to $1.5093 from $1.5082.