Hong Kong: Asian stocks and commodity prices climbed on Monday after China unveiled a nearly $600 billion economic stimulus plan, one of many measures countries are undertaking to limit the economic fallout from the financial crisis.
Japanese government bonds and US Treasuries retreated as funds flowed back into riskier assets on hopes for stimulus measures by other major economies, with US President-elect Barack Obama pushing for urgent passage of more fiscal spending in the world’s largest economy.
The yen fell as investors embraced the high-yielding Australian dollar after China’s announcement and as financial officials from the Group of 20 economic powers, which include major developing countries, ironed out ways to stimulate growth at a weekend meeting.
The damage inflicted by the worst financial crisis since the Great Depression was highlighted late last week by data showing the US jobless rate hitting a 14-year high just as General Motors and Ford Motor Co. said they were fast burning through cash for operations.
Japan’s Nikkei share average rose 5.5% in early trade, getting a boost from the gains on Wall Street late last week on some bargain hunting among investors.
The market shrugged off data earlier on Monday showing Japan machinery orders matched the biggest quarterly drop on record in the July-to-September period, focusing instead on the hefty Chinese spending measures targeting infrastructure.
The Shanghai Composite index jumped 5.3%, helping lift the MSCI index of Asia-Pacific stocks outside of Japan 3.5 percent.
South Korea’s KOSPI index pushed up 1.5% after initially struggling to hold gains due to the drag of Hyundai Motor, which lost 4.4%.
But Taiwan’s benchmark TAIEX fell, struggling even after the country’s central bank delivered a surprise interest rate cut at the weekend, the fourth reduction in a little more than a month to shield the export-dependent economy.
Economists at Goldman Sachs said in a note to clients that Obama’s sweeping election last week meant that another US stimulus package would top its initial estimate of $200 billion and would involve more spending over a longer timeframe.
The dollar gained 0.9% to 99.10 yen holding off a 13-year low of 90.87 yen struck on trading platform EBS last month during the height of the sell-off in stocks, commodities and higher-yielding currencies.
Financial markets have gradually started to settle down from the sharp October sell-off when many investors rushed to raise cash, hedge funds confronted big redemptions and portfolio managers grappled with the deteriorating economic outlook.