Japan and Australia moved yesterday to shore up consumer and investor confidence, as governments around the world took new steps to ease the global financial crisis and stocks soared in response.
The surge in markets was welcome news after weeks of turmoil that have seen trillions of dollars wiped off share values, but analysts warned that the crisis was far from over amid continuing fears of a global recession.
Australia launched a US$7.25 billion economic stimulus package, while Japan relaxed restrictions on companies buying back their own shares, looking to address the worst crisis in world finance since the Great Depression.
Australian Prime Minister Kevin Rudd said the stimulus package was intended to address concerns that the crisis was moving beyond dramatic losses in share values to pose a threat to his country’s solid economic growth.
“The global financial crisis has entered into a new dangerous and damaging phase, one that goes to the real economy — growth and jobs,” Rudd said.
Japanese stocks rose 14 percent and Australian shares were up 3.7 percent, following big gains around the globe on Monday in the wake of new measures by world leaders to unfreeze blocked credit flows and inject money into markets.
“We’ve seen phenomenal gains,” said Adrian Leppinus of Cameron Securities in Australia. “There’s been a mad rush for people to get back in.”
Europe’s main stock markets soared for a second day running in early deals on Tuesday. The London stock market jumped 4.32 percent, Frankfurt’s DAX was up 3.46 percent and the CAC 40 on France was up 4.14 percent shortly after the open.
But markets around the world are still sharply down for the year, and analysts have cautioned that the situation remains uncertain, with wild fluctuations common in the recent months of turmoil.
In Japan and Hong Kong, stock markets are off about 38 percent this year, while the US Dow Jones has shed 29 percent and London’s FTSE 100 is down 31 percent.
“The markets had been saying it was necessary to inject public funds into troubled financial institutions and countries have moved to do that,” said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC in Japan.
But, “even if sentiment recovers for now, it can worsen again because of concerns about the economy,” he said.
Wall Street surged on Monday on the latest developments, jumping more than 11 percent in the Dow’s biggest points gain on record.
Markets were also cheered by trillion dollar rescue packages in Europe, with governments working in concert to stem the crisis.
Germany, France, Spain and Austria pledged a total of 1.03 trillion euros (US$1.4 trillion) on Monday for troubled financial institutions, while the UK pumped 47 billion euros into three struggling banks.
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