Checking on stock prices in Tokyo, where the Nikkei 225 rose 5.2 percent on Monday. Shares in Europe also surged, helped by government efforts to bolster growth. (Shizuo Kambayashi/The Associated Press)

MARKETS

Stocks rally in Europe and Asia

By David Jolly and Bettina Wassener

Published: December 8, 2008

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PARIS: Stocks rose sharply Monday in Europe and Asia, lifted by government efforts to bolster economic growth.

A week after a wave of coordinated interest rate cuts by major central banks, policy makers were meeting in Beijing for an annual economic conference, and investors were hoping for new stimulus measures.

In the United States, Barack Obama, the U.S. president elect, pledged Friday to roll out the biggest public works program in decades. And officials in India over the weekend announced tax cuts and added spending plans. India's central bank also followed its peers around the world in lowering interest rates.

Valérie Cazaban, a fund manager at Stratège Finance in Paris, said stocks had gotten a temporary jolt from the proposed stimulus measures, but that there was no change to the underlying sentiment.

"Stocks are up for the moment," she said, but "the market is still in a bear trend. Today we've got a technical rally."

In morning trading, the DJ Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 6.4 percent, while the FTSE 100 index in London rose 4.6 percent. The CAC 40 in Paris rose 6.4 percent, and the DAX in Frankfurt rose 6.3 percent.

Trading in U.S. index futures suggested Wall Street stocks would open more than 2 percent higher. The Standard & Poor's 500 index rose nearly 3.7 percent Friday.

Asian markets rose sharply. The Tokyo benchmark Nikkei 225 stock average rose 5.2 percent, while the S&P/ASX 200 index in Sydney rose 4.1 percent. The Hang Seng index in Hong Kong rose 7.8 percent in late trading, and the Shanghai Stock Exchange composite index rose 3.6 percent.

U.S. crude oil futures for January delivery rose $2.45 to $43.26 a barrel.

Investors noted that the global rally came amid grim economic news from around the world. Volatility in American stocks, as measured by the VIX index, remains at extremely elevated levels.

Perhaps the single best indicator of the state of the economy, the job market is collapsing faster than most economists had anticipated. The latest U.S. employment data, released Friday, showed U.S. employers cut 533,000 jobs in November, the most in 34 years, while the jobless rate rose to 6.7 percent, the highest since 1993.

Eisuke Sakakibara, a former vice-minister of finance in Japan, and now a professor at Waseda University, said Monday at a forum in Hong Kong that the decline in asset prices, far from nearing an end, "has only started."

"Most businesses are flying blind, and there is a natural inclination to cut back on spending," Tony Tyler, chief executive of Cathay Pacific, the Hong Kong-based airline, said at the same forum.

The dollar was lower against major European currencies. The euro rose to $1.2883 from $1.2718 late Friday in New York, while the British pound rose to $1.4950 from $1.4686. The U.S. currency fell to 1.2110 Swiss francs from 1.2201 francs. But the dollar rose to 93.12 yen from 92.84 yen.

Cazaban said that while there would be a short-term gain from the U.S. fiscal stimulus, there was a danger that by undertaking such huge measures, the United States could be creating longer-term problems for its currency.

"The millions, billions, trillions of dollars they're talking about are dizzying," she said, and the U.S. might eventually seek to ease the burden of repaying foreign bondholders by weakening the dollar.

Bettina Wassener reported from Hong Kong and David Jolly from Paris.