Hog Kong: Asian shares reversed three sessions of losses to gain on Friday on hopes that government efforts worldwide, including talk of a US subsidy for mortgage payments, would soften the blow of the global downturn.
The improved mood hit assets that had gained from safe haven buying, such as the dollar and some regional bonds, while reduced pessimism about the global economy helped oil advance.
News the US government was hammering out a programme to subsidise mortgages for homeowners before they fall into loan arrears, first reported by Reuters, helped Wall Street stage a late recovery that extended into gains in Asian markets.
Those efforts came as the US Congress prepares to vote on Friday on the $789 billion economic stimulus bill and Australia passed a A$42 billion ($27.4 billion) economic stimulus package.
But optimism was tempered by the tough outlook facing the global economy. Asian stock markets are down about 7% for the year as of Thursday, though still about 18% higher than the five-year lows hit in late November.
“The news about the US mortgage payments plan has temporarily spurred short-covering,” said Takahiko Murai, general manager of equities at Nozomi Securities.
“The bank and economic measures by the US government so far have lacked details and that is a problem. What the market wants to know is how and by when the government will enact measures that prove to be effective.”
The MSCI index of Asia-Pacific stocks outside Japan advanced 1.4% as of 8:15am following a 3.5% decline over the previous three sessions.
After a tough 2008, global markets have yet to convincingly recover amid doubts about the economic outlook, despite multi-pronged efforts by policy makers worldwide that have included tax cuts and lower interest rates.
The occasional signs of hope - such as an unexpected rebound in sales at US retailers in January - have been tempered by many other indicators of just how tough things are getting with the world’s main engines of growth mired in recession.
On early Friday at least, investors had a reprieve. Japan’s Nikkei advanced 1.5%, while shares in Australia, Hong Kong, Taiwan and Singapore advanced about 1% or more each. Seoul’s main index posted a modest 0.5% gain.
The improved mood among global investors comes ahead of this weekend’s G7 meeting of financial leaders, though little in terms of actual policy is expected to emerge.
Bank of Japan governor Masaaki Shirakawa on Friday joined a growing call for G7 finance heads to take steps this weekend to rescue the worsening global economy.
“The world economy is in a very severe situation at the moment, so I want (the G7) to frankly exchange views on such economic conditions and the outlook, and discuss policy steps to help stabilise the world economy,” Shirakawa told a media conference.
US crude futures advanced 59 cents to $34.57 a barrel, after dropping 5.5% on Thursday to settle at its lowest point in nearly two months due to concerns over swelling crude stocks in the United States. Assets that had previously benefited from safe-haven bids retreated.
The dollar fell 0.2% to ¥90.66, having pulled back from Thursday’s high of ¥91.13 hit on trading platform EBS. The euro rose 0.2% to $1.2891 and was steady at ¥116.86.
The passage of a stimulus package in Australia, helped the Aussie climbed to $0.6560 from a low of $0.6446 early Friday, but still below $0.6584 seen here late on Thursday.