Investors snatch bank shares, cheered by Wall Street surge; many hope American bailout plan will pass.
By JERUSALEM POST STAFFwall street plummets 224.88(photo credit: AP)
Japanese share prices recovered on Wednesday morning trading after a surge on Wall Street that came on hopes that a US$700 billion bailout for the US financial system will win legislative approval.
The benchmark Nikkei stock 225 index, which had lost 4.12 percent Tuesday, gained 166.82 points, or 1.48 percent, to 11,426.68 points after about the first half hour of trading.
It had closed at its lowest level in more than three years Tuesday on disappointment over the stalling of the bailout proposal.
The broader Topix index, which had tumbled 3.59 percent the previous session, was also back up, gaining 1.05 percent to 1,098.82 after about the first half hour of trading.
Investors were back snatching up bank shares, cheered by a recovery in US shares and prospects that the bailout plan will pass later in the week.
The US Senate is scheduled to vote on the financial bail out bill on Wednesday.
The dollar's recovery, which tends to be a boost for Japanese shares, also encouraged buying. The dollar was trading at about 106 yen levels, up from about 104 yen earlier in the week.
On Tuesday, most major Asian stock markets fell in stunned dismay over US lawmakers' rejection of a US$700 billion bank rescue plan aimed at stabilizing the US financial system. European markets opened mixed.
As trading progressed on Tuesday, many indices erased losses and Hong Kong's market staged a dramatic turnaround to close slightly higher as investors scooped up beaten-down shares.
Japan's benchmark Nikkei stock 225 index slumped 4.12 percent to close at 11,259.86 on Tuesday - the lowest level since June 9, 2005. In Australia, the S&P/ASX-200 index fell 4.3 percent after falling as much as 5.3 percent.
The bailout bill's failure dealt a "severe blow to Asia markets right after the Lehman shock," said Mitsushige Akino, fund manager at Ichiyoshi Investment Management in Tokyo, referring to the collapse earlier this month of the US investment bank.
"Many investors grew even more cautious because of the latest development over the bill, and they only see passage of the bill as a minor improvement to the crisis," he said.
Some markets bounced back. Hong Kong's Hang Seng index gained 0.76 percent to close at 18,016.21 after earlier plunging more than 5 percent. India's Sensex was up 2.4 percent in afternoon trading.
European markets were modestly mixed in early trading Tuesday, with Britain's FTSE 100 little changed at 4,817.79 and France's CAC up 0.3 percent.
In Russia, regulators halted trading on its two major stock exchanges Tuesday after markets there opened significantly lower.
Investors were stunned by the US House of Representatives' rejection Monday of a $700 billion emergency bailout package that would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions.
With elections in November, many lawmakers were unwilling to take the political risk of supporting a measure that many American voters see as an undeserved bailout for rich, reckless investment bankers.
"This is a bad development," Australian Prime Minister Kevin Rudd told reporters in Australia's capital, Canberra. He urged US lawmakers to urgently return to negotiations to come up with a deal that will prevent further infection of world markets.
In New York, the Dow Jones industrial average plunged 777 points, its biggest ever single-day drop, or nearly 7 percent, to 10,365.45, its lowest close in nearly three years.
Japanese Prime Minister Taro Aso urged the country's financial officials to closely monitor the situation and take appropriate measures to protect the world's No. 2 economy, according to Kyodo News agency.
"We have to respond appropriately in order not to affect the Japanese economy and to prevent the financial system from falling apart," Aso was quoted as saying.
Japan's banks have relatively little exposure to the bad mortgages at the core of the global credit crisis, but investors are worried that a slowdown in the US and global economy will hurt demand for exports.
The Bank of Japan on Tuesday morning pumped another 3 trillion yen ($28.7 billion) into money markets, as part of efforts by central banks worldwide to boost liquidity and bolster interbank lending. That brings the BOJ's total injection to 21 trillion yen ($200.6 billion) since the collapse of Lehman Brothers Holdings Inc. earlier this month.
The chaos sapped the dollar overnight. The greenback was trading at 104.32 yen Tuesday afternoon in Asia from above 106 yen a day earlier, adding further pressure on major exporters.
Markets in mainland China are closed this week for National Day celebrations, and Hong Kong will be closed Wednesday.
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