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Global stocks soar as banks get bailouts

business Updated: Oct 14, 2008 09:40 IST

AFP
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A global rally sent Asian stocks skyrocketing on Tuesday as world governments threw lifelines to ailing banks in a bid to end the worst financial crisis since the Great Depression.

Investors cheered the latest steps by world leaders to unlock frozen credit markets, driving the Dow to its biggest gain in 75 years overnight.

Tokyo's Nikkei index soared 13 per cent by lunch, one of its biggest ever gains, as the Japanese government unveiled market stabilising measures including an easing of restrictions on company share buy-backs.

Stocks soared more than five per cent in Hong Kong, Sydney and Seoul after European governments pumped billions of dollars into their credit-starved banks and Washington said it would buy stakes in an array of financial firms.

"The markets had been saying it was necessary to inject public funds into troubled financial institutions, and countries have moved to do that," said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC.

It was a spectacular turnaround for the Nikkei, which plunged 9.62 per cent on Friday, the biggest loss in two decades, capping its worst week ever. Japanese markets were closed on Monday.

The surge came after Wall Street's Dow Jones index jumped 11.08 per cent on Monday, snapping an eight-session losing streak.

It was the Dow's biggest points gain on record and its sharpest percentage rise since 1933 during the Great Depression.

"Sharp stocks market gains were in response to the latest bold measures from the major economies to shore up banks, unfreeze credit markets and boost liquidity in money markets," said NAB Capital strategist John Kyriakopoulos.

Sydney meanwhile was 5.2 per cent ahead at the midday break, while Hong Kong and Seoul both opened up 5.1 per cent.

"We've seen phenomenal gains," said Adrian Leppinus of Cameron Securities in Australia. "There's been a mad rush for people to get back in."

US President George W Bush and Treasury Secretary Henry Paulson were both due to make statements later in the day on action to shore up public confidence following the market turmoil.

Neel Kashkari, the newly appointed Treasury Department official tasked with managing the 700-billion-dollar US rescue package, on Monday revealed plans for the US government to buy stakes in several banks.

European leaders unlocked more than one trillion euros in rescue funds for the troubled banking sector, pledging to plough capital into the hardest-hit banks and massively underwrite loans between financial players.

In Australia, Prime Minister Kevin Rudd unveiled an economic stimulus package worth 7.25 billion US dollars, warning the financial crisis was threatening economic growth and jobs.

As stocks rallied, the dollar rose to 102.87 yen, up from 102.01 in New York late on Monday.

"The firmer dollar against the yen reflects improved investor confidence following rallies on stock markets," said Marito Ueda, currency dealer at FX prime.

"Markets are watching if further policy measures will come from the US government and if stock markets will really calm down," he said.