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World stocks skyrocket after G-20 summit boost

world Updated: Apr 02, 2009 23:55 IST

AFP
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Global stocks shot up on Thursday amid greater optimism following a G-20 summit in London that boosted efforts to save the world economy and after an uptick in US manufacturing orders.

On Wall Street, the Dow Jones Industrial Average rose 3.45 per cent and the tech-heavy Nasdaq index was up 3.83 per cent at 1600 GMT.

London's FTSE 100 index of leading shares closed up 4.28 per cent, Paris soared 5.37 per cent and Frankfurt rocketed up 6.07 per cent.

Hong Kong led the charge in Asia, shooting up 7.41 per cent, while Tokyo closed up 4.40 per cent at a three-month high and Mumbai gained 4.51 per cent.

Investors had been expecting a strong lead from the Group of 20 meeting of world leaders in London, which has been overshadowed by differences between Europe and the United States in seeking ways to end the global crisis.

US-based market analysis company Briefing.com said in a note to clients that "markets are encouraged that nations are at least attempting to coordinate actions" after earlier scepticism and divisions.

G-20 leaders on Thursday agreed to give an extra one trillion dollars for international credit and an extra 250 billion dollars to boost global trade, as well as setting new rules on pay and bonuses for corporate chiefs.

"A new world order is emerging and with it we're entering into a new era of international cooperation," British Prime Minister Gordon Brown said in a post-summit press conference.

French President Nicolas Sarkozy, who had threatened to walk out of the summit if it did not meet his aims, said its conclusions were "more than we could have hoped for" from the crunch talks.

US banking giant Citigroup said one key achievement was the "much reduced risk of an emerging market currency crisis, thanks to the increased funding for the IMF (International Monetary Fund) and commitment to support trade finance."

Derek Halpenny from Bank of Tokyo-Mitsubishi said: "What is most encouraging for the G-20 leaders summit in London today is the building evidence that the Lehman-related collapse in global demand seems to be coming to an end."

The collapse of US bank Lehman Brothers last year aggravated a serious financial sector crisis and loss of confidence in the economy in the United States, which then spread to almost every other part of the world.

"Demand for equities is improving, signalling that the light at the end of the tunnel is getting closer," said Joshua Raymond, market strategist at London-based online spread-betting firm City Index.

Stocks got an extra boost by a 1.8-per cent rise in orders for US manufactured goods in February after six consecutive monthly declines, the latest sign that the decline in industrial activity may have hit bottom.

Marisa Di Natale, an analyst at international ratings agency Moody's research group Economy.com, warned however that orders for US consumer goods like cars and appliances, continued to fall.

"Though the February report offers a glimmer of hope that business investment spending may have reached a bottom or be nearing a bottom, consumers remain on the sidelines," she said.

Market attention also turned to the European Central Bank, which cut its key interest rate by a less-than-expected quarter point to a record low 1.25 per cent and stuck to a guardedly upbeat medium-term outlook.

Global stocks have risen over the past four weeks as confidence returns to markets following a number of stimulus measures by governments and a US pledge to help banks clear their books of toxic assets that have clogged lending.