World markets rise on U.S. rally, stimulus hopes

Asian stock markets rose strongly Monday, with benchmarks in Hong Kong and Shanghai gaining more than three per cent, as Wall Street's rally and government stimulus plans buoyed investor hopes for 2009.

European markets also opened higher.

Investors seemed encouraged after president-elect Barack Obama urged congressional leaders Saturday to move quickly on recovery measures that aides say could cost as much as $775 billion US, including a reported $300 billion in possible tax cuts.

Also helping sentiment, Chinese Premier Wen Jiabao said over the weekend that Beijing would enact new measures to help the steel and auto industries. That comes on top of a massive stimulus package announced in November.

In a shortened half-day session, Tokyo's Nikkei 225 stock average gained 183.56 points, or 2.1 per cent, to 9,043.12, its first finish above the 9,000-point line since Nov. 10.

In greater China, Hong Kong's Hang Seng climbed 3.5 per cent to 15,563.31 and Shanghai's key index gained 3.3 per cent to 1,880.72.

Singapore's benchmark jumped 4.5 per cent, with stock measures in Taiwan, India, South Korea, Malaysia and Thailand higher as well.

Europe followed Asia higher, though gains were smaller.

Britain's FTSE 100 rose 0.4 per cent, Germany's DAX advanced 0.8 per cent and France's CAC 40 added 0.4 per cent.

Manufacturing data bleak

The upbeat mood came after global markets rang in the new year with a strong advance despite more dismal economic news, including evidence that manufacturing in the U.S., Europe and China was deteriorating amid the slowdown.

Though increasingly optimistic markets will fare better this year after the relentless selling in 2008, investors are bracing for a difficult first half, when company earnings and economic data could prove especially bleak. Still, the market's resilience of late could be a sign that many have already started positioning for a possible turnaround in the world economy and equities prices later in the year.

"We are still trading more on sentiment than fundamentals, and the sentiment is that fiscal stimulus will allow the economy to recover," said Dariusz Kowalczyk, chief investment strategist for CFC Seymour in Hong Kong.

"The market is relatively cheap, and with investors hoping for a recovery in the global economy in the second half, it makes sense to buy now before that happens."

Global markets are likely to be tested this week with fresh U.S. data on everything from jobs to manufacturing and car sales in the world's largest economy.

The session was the year's first for a number of Asian countries, including Japan, where markets were still closed Friday, and volumes were higher across the region as traders returned from the holidays.

Rising commodities prices lifted energy and metal producers, and Japanese shares got a boost from a weakening yen, which helps the country's exporters.

Sony rose 2.5 per cent and electronics giant Panasonic Corp. gained 2.5 per cent. Toyota jumped 3.6 per cent and Honda Motor Co. added 2.7 per cent.

Tax cuts likely in U.S.

In his weekend radio address, Obama urged Congress to move quickly on an economic recovery plan, which aims to create three million jobs. Congressional aides briefed on the measure say it probably would include tax cuts of $500 to $1,000 for middle-class individuals and couples; Obama advisers told the New York Times on Sunday that tax cuts for workers and businesses could total $300 billion.

Confidence also got a boost from Wall Street's gains on Friday, when the Dow Jones industrial average jumped nearly three per cent, closing above 9,000 for the first time in two months as investors shrugged off a weaker-than-expected report on manufacturing.

Wall Street futures were modestly lower, pointing to a weak opening Monday in New York. Dow futures were down 22 points, or 0.3 per cent, at 8,936 and S&P 500 futures were off 0.8 points, or 0.1 per cent, at 924.60.

In India, Mumbai's Sensex climbed two per cent after the government announced plans late Friday to lower key interest rates by one percentage point and boost spending to arrest the country's slowing economic growth. It was the second stimulus package announced in the past month.

In Japan, financials soared amid reports that the government might purchase bad loans from banks, with Mizuho Financial Group up 13.3 per cent and Sumitomo Mitsui Financial Group gaining 11.4 per cent.

Crude oil price rose in Asia trade, with light sweet crude for February delivery up 26 cents at $46.60. The contract soared last week to settle Friday at $46.34, up $1.74, amid spiralling violence in Gaza and expectations of OPEC productions cuts.

In currencies, the dollar rose to 92.89 yen, up from 91.79, and the euro skidded to $1.3687, down from $1.3918.