- The Washington Times - Monday, March 23, 2009

LONDON (AP) - World stock markets soared Monday ahead of a U.S. announcement to purge as much as $1 trillion in bad bank assets and as Japan signaled more stimulus measures to resuscitate the world’s second-largest economy.

By noon in mainland Europe, Britain’s FTSE 100 climbed 1.4 percent to 3,898.17, Germany’s DAX jumped 1.8 percent to 4,143.15, and France’s CAC 40 advanced 1.5 percent to 2,833.61.

Investors were largely cheered by the Obama administration’s latest effort to heal the hard-hit financial sector and restore bank and consumer lending. The program, to be unveiled later Monday, involves creating a new government entity to clear from bank balance sheets up to $1 trillion in souring securities and loans at the root of the crisis.

The initiative seeks to enlist private investors by offering billions of dollars in low-interest loans and sharing certain risks, and is just the latest in an unprecedented effort by major governments to stem the worst global downturn in decades.

“Simply hoping for banks to work these assets off over time risks prolonging the crisis,” U.S. Treasury Secretary Timothy Geithner wrote in an opinion piece in Monday’s Wall Street Journal.

U.S. futures were boosted by the pending announcement. Dow industrials futures jumped 2.4 percent to 7,425, Standard & Poor’s 500 index futures rose 2.7 percent to 787.90, and Nasdaq 100 index futures added 2.7 percent to 1,219.50. On Friday, Wall Street lost ground without any significant news to reinforce its recent rally.

“Markets are certainly reasonably buoyant this morning after a difficult session in the States _ pretty much all around anticipation for Mr. Geithner’s plans to try and move toxic assets from the banking sector,” said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers in London. “There’s hope that this second announcement will prove more fruitful than the first one we heard in February, when investors felt there was not enough detail.”

In Asia, markets resumed their two-week advance after ending mixed Friday. Tokyo shares helped lead the region’s gains, with the country’s benchmark hitting a two-month high, after Japan’s finance minister said aggressive public spending to the tune of 20 trillion yen ($208 billion) might be needed to end the country’s painful recession.

The market’s mood was shadowed by questions about whether enough private investors would participate and how the banks’ highly illiquid assets would be priced. But for now, news of the bailout helped re-energize a global rally that started two weeks ago on signs of improvement in the financial system.

“It’s becoming difficult to remain bearish,” said Desmond Tjiang, chief investment officer, who helps manage $3 billion in Asian equities at Fortis Investment Management in Hong Kong. “The governments have definitely helped … and people are still hoping for a second-half recovery.”

In Europe, shares of Daimler AG were up 2.5 percent, after earlier rising 8.2 percent, following an announcement that Abu Dhabi-based Aabar Investments PJSC will buy a stake in the German automaker and become its biggest shareholder. Aabar’s biggest shareholder is the International Petroleum Investment Co., owned by the Abu Dhabi government.

Tokyo’s Nikkei 225 stock average surged 269.57 points, or 3.4 percent, to 8,215.53 as a weaker yen also boosted sentiment. Hong Kong’s Hang Seng jumped 613.91, or 4.8 percent, 13,447.42, and South Korea’s Kospi climbed 2.4 percent to 1,199.50.

Elsewhere in Asia, Shanghai’s key index added 2 percent to 2,325.48 on higher commodity prices. Australia’s benchmark gained 2.4 percent, while India’s Sensex climbed 5.1 percent to 9,424.02.

Banks were especially strong across the region, with Japan’s Sumitomo Mitsui Financial Group Inc. jumping 7.3 percent and Mizuho Financial Group Inc. up 5.3 percent. China Construction Bank surged 7 percent in Hong Kong.

Higher oil and commodity prices lifted Australian mining giant BHP Billiton Ltd, which rose 3.5 percent. Benchmark crude for May delivery gained 10 cents at $52.17 a barrel in European trade.

On Friday in New York, the Dow Jones industrial average had fallen 122.42, or 1.7 percent, to 7,278.38. Broader stock indicators also lost ground, with the Standard & Poor’s 500 off 15.50, or 2 percent, to 768.54.

___

AP business writer Jeremiah Marquez in Hong Kong contributed to this report.

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