February 28, 2024

Asian Markets Rally on Central Banks’ Actions

HONG KONG — Stock markets across the Asia-Pacific region rose on Friday, continuing a rally that had lifted markets in Europe and the United States, as investors took comfort from moves by the world’s leading central banks to increase liquidity in the European banking system.

The European Central Bank and its counterparts in the United States, Britain, Japan and Switzerland essentially opened new lines of credit to European banks, allowing them to borrow U.S. dollars for up to three months — a period that gives them breathing space for the rest of this year.

The move was designed to ease the pressure on European lenders, some of which have found it hard to borrow dollars from American lenders amid mounting concerns about the European banking sector’s exposure to Greece.

Analysts cautioned that the step, while providing welcome relief to beleaguered financial institutions, was no panacea for the underlying problem: the crippling debt levels that threaten to push Greece into default and have set off wider turmoil in global financial markets.

“It’s an important and gratifying but small step in the right direction,” commented Andrew Pease, chief investment strategist for Asia Pacific at Russell Investments, in a conference call with the media on Friday.

But he added that ultimately, more concerted activity was needed toward a more fiscally united Europe.

“Things will likely need to get worse,” he said, before the necessary decisions to “clear the air” would be taken.

Still, investors around the world greeted the announcement with a renewed willingness to buy stocks.

The benchmark indexes in Hong Kong and Japan both climbed 2 percent by early afternoon. The Kospi in South Korea rallied 3.6 percent, the Taiex in Taiwan added 2.9 percent and the benchmark index in Australia rose 1.8 percent.

The Sensex index was 1 percent higher by late morning in India.

The euro was trading at around $1.3869, having firmed markedly against the dollar on Thursday.

On Thursday, the DAX in Germany and the CAC 40 in France had both gained more than 3 percent on Thursday, while in the United States, the Dow Jones industrial average and the Standard Poor’s 500 both closed up 1.7 percent.

Futures on the S. P. 500 were higher in Asia on Friday, signaling that Wall Street could see another firm start.

Meanwhile, a key meeting of European finance ministers and other policy makers in the Polish city of Wroclaw on Friday and Saturday has fanned expectations of potentially more determined action to contain the escalating sovereign debt crisis.

The U.S. Treasury secretary, Timothy F. Geithner, will also be attending, which analysts said is a sign of how strong the sense of urgency surrounding the eurozone debt crisis has become.

Analysts said they expected Mr. Geithner to press European ministers at the meeting to increase the resources available to their bailout fund for the euro zone countries. But even the expansion of the fund to €440 billion, or $611 billion, agreed to in July, has yet to be ratified. There is some worry that countries guaranteeing the bailout fund might themselves face doubts about their own credit.

The Federal Reserve’s meeting next week will also be closely watched, amid expectations that the bank will signal new measures for the lumbering U.S. economy.

“The Fed is under pressure to come up with some sort of additional stimulus. It is also under pressure not to do so,” analysts at DBS said in a research note on Friday, highlighting the complex pressures facing the U.S. central bank and the internal debate about how best to act. “Still, we expect the Fed will do something, mainly because that’s the Fed’s job. You can’t just say ‘we’re out of ideas’ and walk away.”

Jack Ewing contributed reporting from Frankfurt.

Article source: http://www.nytimes.com/2011/09/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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