World markets lifted by credit easing
LONDON -- World stocks rose Monday as lower interbank lending rates fueled hopes that credit markets are returning to normal following concerted action by governments and central banks to shore up the financial system.
Britain's FTSE 100 index of leading shares was up 88.94 points, or 2.2 percent, at 4,151.95, while Germany's DAX was 11.74 points, or 0.3 percent, higher at 4,793.07. The CAC-40 in France was 49.81 points, or 1.5 percent, stronger at 3,379.73. The Dow Jones index of leading U.S. shares opened 54 points, or 0.6 percent, higher at 8,906.22.
Those gains follow the 3.6 percent advance on Japan's Nikkei 225 to 9,005.59 and the 5.3 percent jump in the Hang Seng index in Hong Kong to 15,323.01.
Stock markets have been buoyed by the fall in interbank lending rates in light of the flurry of government efforts to put money into banks over the last couple of weeks, and by coordinated interest rate reductions and massive liquidity boosts by central banks.
"That has certainly helped and we are definitely seeing almost normal markets and maybe we will see markets build on the lows of last week," said David Jones, chief markets strategist at IG Index.
Figures earlier confirmed that money market rates are falling. The interbank lending rate for three-month dollar loans fell for the sixth day running Monday and by its biggest daily amount since January. It dropped 0.36 percent to 4.06 percent, while the three-month Euro Interbank Offered Rate, or Euribor, fell almost 0.05 percentage points to 5.00 percent.
Overnight, the Hong Kong interbank offered rate, known as Hibor, for three-month loans tumbled to 3.66 percent from 4.19 as the territory's de facto central bank pumped more money into the financial system.
Abnormally high interbank lending rates have been a sign of distress in credit markets and been the catalyst for the crisis in the financial markets over recent weeks. High interbank rates can choke off credit to businesses and individuals, hurting the economy.
Some financial stocks in Britain benefited from the thawing of money markets with Britain's Barclays PLC and Lloyds TSB PLC up 4.1 percent and 2.4 percent respectively. Royal Bank of Scotland PLC was also up 4.5 percent on reports that CVC Capital Partners and Swiss Re are looking to buy a majority of the British bank's insurance assets.
The biggest gainer in Europe was Amsterdam-listed ING Groep NV after the Dutch government injected euro10 billion ($13.4 billion) into the financial company over the weekend. Its shares were up 23 percent, almost recouping most of last Friday's losses.
Energy stocks, such as BP PLC and Royal Dutch Shell, were also up as oil prices rose another US$1.78 a barrel to over US$73.63 on mounting talk that OPEC will cut production at the end of this week in an attempt to shore up prices that have fallen by 50 percent in three months.
Even if Libor rates continue to decline, analysts say stock markets will not be out of the woods given the sharp economic slowdown likely to occur over the coming months, which will become more and more evident as companies report their latest earnings.
"Equity markets are at least as worried about the economic outlook now as they are about the health of the financial system, though the two are related of course," said Tony Dolphin, Director of Economics and Asset Allocation at Henderson Global Investors.
Earlier in Asia, South Korea's Kospi climbed about 2.3 percent after the government's announcement Sunday to provide up to US$100 billion to secure banks' maturing foreign currency debt and another US$30 billion for the banks.
Mainland China shares, meanwhile, recovered early losses to edge higher in spite of new government figures showing the country's economic growth eased to 9 percent in the third quarter of this year -- its slowest in more than five years.
The reading, while still robust, fed into anxiety that deteriorating financial and economic conditions around the world were damaging Asian growth.
Investors, though, were relieved by lower third-quarter inflation data and pledges of fresh government intervention to support the economy. Shanghai's key index, down more 0.7 percent in the morning, ended 2.25 percent higher at 1,974.01.
In Tokyo, shares moved higher amid hopes for better-than-expected corporate earnings. Panasonic Corp. jumped 8.87 percent after the Nikkei business daily reported over the weekend that, helped by strong TV sales, the electronics giant would beat its interim operating profit forecast by more than 20 billion yen (US$197.3 million).
The dollar was little changed at 101.76 yen, while the euro was lower at US$1.3353.