Most Asian markets extend gains after U.S. rally

Most Asian stock markets rose Wednesday after a stunning rally on Wall Street as investors awaited possible interest rate cuts from central banks in the U.S. and Japan.

Japan's market was by far the best performer: the Nikkei 225 index jumped 589.98 points, or 7.7%, to 8,211.90.

But elsewhere, the regional rally fizzled by the afternoon as traders cashed in profits amid fresh worries about company earnings.

Hong Kong's Hang Seng Index, up nearly 5% in early trading, trimmed its gain to 1.3% after a spectacular 14.4% rise the day before. Australia's S&P/ASX200 climbed 1.3%.

South Korea's index, however, pared its morning gains and dropped 3.6% as bank stocks pulled back on fears they may cut dividends after the government guaranteed their foreign currency loans.

The region's broader move higher came after a massive overnight advance on Wall Street, where the Dow Jones industrial average soared nearly 900 points, or 10.9%, to 9,065.12 to its second-largest point gain following rises in Asian and European markets earlier in the day.

The U.S. Federal Reserve is expected to cut its target fed funds rate by half a point to 1% on Wednesday. Markets also were holding out hope the Bank of Japan would trim its interest rate — already at a low 0.5% — when it meets Friday after The Nikkei business newspaper reported that such a move was being considered.

"The optimism is fueled by the prospect of rate cuts," said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co., which manages about $300 billion in assets. "Wall Street's rally brought some extra confidence to the market, reminding investors that selling might have been overdone and this might be a good time to pick some values."

"Having said that, this doesn't necessarily signify the absolute bottom and that things will be rosy from here," he said.

A weaker yen also prompted investors in Tokyo to buy exporters like Toyota Motor, which shot up 10.4%. Honda Motor jumped 18% even though on Tuesday it reported a 41% drop in quarterly profit and lowered its forecast for the full year.

The dollar weakened some Wednesday after suring above 98 yen the day before — up sharply from 93.93 yen late Monday. It was trading at 96.96 yen in Asian trading. A strong yen erodes exporters' overseas earnings.

Japanese financials also rose, with megabank Mitsubishi UFJ Financial Group up 4.4%.

Oil prices rose. Light, sweet crude for December delivery advanced $1.69 to $64.42 a barrel in Asian trade on the New York Mercantile Exchange. The contract slid 49 cents overnight to settle at $62.73, the lowest closing price since May 15, 2007.

Contributing: AP Business Writer Kelly Olsen from Seoul