Europe, Asia stock markets surge after Fed rate cut
HONG KONG -- European shares extend their rally into a third day Thursday, after Asian stock markets bounced up by double-digit percentages on hopes that lower interest rates will give a push to ailing economies.
And U.S. stock futures were pointing to a higher open Thursday.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 were up 1.6% to 4%.
After the Federal Reserve cut U.S. interest rates Wednesday, Tokyo's benchmark Nikkei 225 shot up nearly 10%, or 818 points, to 9029.76. The Nikkei has now risen 26% the past three sessions after hitting a 26-year low last week. In Hong Kong, the Hang Seng index surged nearly 13%. In Seoul, the South Korean benchmark Kospi index enjoyed a record day, jumping nearly 12%.
Japanese investors cheered when their currency, the yen, weakened against the U.S. dollar and the euro, improving the competitive edge of export companies such as Toyota and Canon, both of which saw their shares rise more than 11% Thursday.
"The Japanese economy very much relies on exports. That's the biggest factor" in the Nikkei rally, said Ikuo Yasuda, chairman and CEO of the financial advisory firm Pinnacle Inc. in Tokyo.
Investors also are expecting the Bank of Japan to cut interest rates when it meets Friday, reacting to increasing evidence that the Japanese economy sank into recession during the third quarter, Moody's Economy.com reported.
In Seoul, the Kospi got a boost from news that the Bank of Korea and the Fed had reached an agreement to help stabilize the South Korean currency, the won; and that the deficit in the country's current account – the broadest measure of trade — had narrowed to $1.2 billion in September from $4.7 billion in August. Moody's said the improved trade numbers would "ease fears of any impending crisis." The won had been hammered by a widening trade deficit caused in part by surging oil prices.
Pinnacle's Yasuda warns that a couple of good sessions don't mean stock markets have started a long- or medium-term rally after crumbling in the wake of Wall Street's financial meltdown: The up days are just part of a roller-coaster ride as investors try to figure out where things are headed. "The stock prices change 5%, 10% every day," he said. "The volatility is too much."
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