Asian stocks extend rally on hopes for global rate cuts
— -- Asian stocks rallied on Wednesday following a big gain on Wall Street, on hopes the Bank of Japan and the Federal Reserve will deliver interest rate cuts this week to support the sharply slowing global economy.
Japan's Nikkei 225 index finished its morning session up 6.4%, or 487.42 points, at 8,109.34, after earlier rising as much as 7%.
The gains came after U.S. shares soared Tuesday, with the Dow Jones industrials gaining nearly 900 points, the second-largest point gain ever. The Dow and the Standard & Poor's 500 index each finished with a nearly 11% rise.
Japanese banks were up after the Nikkei business newspaper reported the country's central bank was considering cutting interest rates. In midmorning trade, Mitsubishi UFJ Financial Group was up 8.5% at 598 yen, while Mitsui Sumitomo Financial Group was up 8.1% at 362,000 yen.
Some large exporters also pushed higher, as the yen continued to weaken against the dollar, trading at 97.13 yen. Last week it rose to the 90-yen level, a 13-year high. Printer and camera maker Canon, which derives the bulk of its revenues from overseas sales, was up 10.4% at 1,590 in early morning trade.
In Seoul, the benchmark Korea Composite Stock Price Index was up more than 5% to 1,049.92 after being up as much as 7.9%.
The U.S. Federal Reserve is widely expected to cut its key rate for the ninth time since September 2007 later on Wednesday, and the Bank of Japan will consider lowering its policy rate at a meeting on Friday, according to sources familiar with the matter.
How much either action will turn around near-term prospects for the U.S. and Japanese economies is unclear, especially since the U.S. labor market is forecast to have lost nearly 180,000 jobs this month and economists from JPMorgan to UBS see the global economy sliding into recession.
"Hopes of a BOJ rate cut are everything," said Masayoshi Okamoto, head of trading at Jujiya Securities in Tokyo. "But as long as the dollar is below 100 yen there will be worries about Japanese company earnings in the second half of this business year, and this will limit the Nikkei's rebound."
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