World stock markets regained their gumption Monday - with the Nikkei hitting a nine-month high - as the resignation of Egypt's president eased worries over political instability in the Arab world.
Oil prices hovered below $86 a barrel as the latest developments in Egypt reduced the immediate chances of disruption to oil production in the Middle East. In currencies, the dollar was down against the yen but up against the euro.
European bourses headed higher in early trading. Britain's FTSE 100 rose 0.3% to 6,080.96. Germany's DAX was up 0.5% to 7,405.83 and France's CAC-40 was 0.3% higher to 4,114.44. Ahead of the opening bell, Dow Jones industrial futures rose slightly to 12,247. S&P 500 futures lost 3 points to 1,327.10. Tokyo's Nikkei 225 stock average climbed 1.1% to 10,725.54 - its highest close since May 6, 2010 - unfazed by confirmation from Japan's government that China's economy surpassed its own as the world's second largest in 2010. And while gross domestic product shrank at an annualized rate of 1.1% in the October-December quarter, the contraction wasn't as bad as forecast. Hong Kong's Hang Seng added 1.3% to 23,121.06 and Australia's S&P/ASX 200 climbed 1.1% at 4,935.80. South Korea's Kospi gained 1.9% to 2,014.59. Shares in New Zealand, Singapore and Taiwan were all higher.
Sentiment was upbeat as relief spread across Asia over the departure of the 82-year-old Egyptian President Hosni Mubarak, who surrendered power to the military Friday after an 18-day uprising by millions of protesters demanding his resignation. Investors had been worried during the nearly three weeks of anti-government demonstrations that the unrest in Egypt could spread to countries like Saudi Arabia, one of the world's biggest exporters of oil. Mainland Chinese share markets rose on expectations that inflation data due out Tuesday would be lower than previously expected at just over 5%. The inflation rate in December was 4.6% compared with a 28-month high of 5.1% the month before.
The benchmark Shanghai Composite Index gained 2.5% to 2,899.13 and the Shenzhen Composite Index rose 2.3% to 1,262.11. Banks and other financials led the gains, with Industrial and Commercial Bank of China, the country's biggest lender, climbing 1.9%.
"Investors are preferring shares after recent moves to discourage speculative investments in the property sector," said Liu Kan, an analyst at Guoyuan Securities, in Shanghai. However, analysts at DBS Bank Ltd. in Singapore projected China's inflation rate at 5.5%, boosted in large part by rising food prices, and said more interest rate hikes could be expected from Beijing in a bid to tame inflation. China has already hiked rates three times since October.
"The upward price pressure comes from strong food demand ahead of (the) Lunar New Year holiday and tight food supply due to occurrence of droughts for months in several provinces," DBS said in a research note. "The central bank may need to quicken the pace of rate hikes to contain mounting inflation expectation." Rising prices are especially sensitive in a country where poor families can spend up to half their incomes on food. Higher incomes have helped to offset price hikes, but inflation undercuts economic gains that help support the ruling Communist Party's claim to power. In New York on Friday, the Dow Jones industrial average rose 43.97 points, or 0.4%, to 12,273.26, its highest finish since June 2008.
Economists said they expect U.S. consumer confidence to continue to rise this year as hiring increases and consumer finances improve. The next reading on consumer spending comes Tuesday, when the Commerce Department releases retail sales numbers for January. This week also sees U.S. data on housing starts and industrial production, which "all should remind us that the economy continues to progress while inflation remains low," DBS said. In currencies, the dollar slipped to 83.22 yen in Tokyo on Monday from 83.40 yen in New York late Friday. The euro was quoted at $1.3473 from $1.3551.
Benchmark crude for March delivery was down 28 cents at $85.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.15 to settle at $85.58 a barrel on Friday.