Markets partly recover due to AIG rescue plan

Wall Street's overnight rise lifts sentiment; oil prices rise but remain well below $100 a barrel.

By JERUSALEM POST STAFF
malasian markets 224.88 (photo credit: AP)
malasian markets 224.88
(photo credit: AP)
Asian stock markets partly recovered Wednesday after the US government announced a $85 billion plan to bail out troubled insurance giant American International Group Inc. Wall Street's rise overnight also lifted sentiment after Tuesday's huge sell-off in Asia. Japan's Nikkei 225 average rose 2.1 percent to 1,1850.78 by midday after sinking nearly 5 percent the day before to its lowest close in more than three years. South Korea's Kospi climbed 2.7 percent and Taiwan's benchmark rose 1.5 percent. But Hong Kong's blue-chip Hang Seng Index was 0.8 percent lower, while Australia's S&P/ASX 200 shed 0.3 percent. Investors sent the region's stocks spiraling downward Tuesday, reacting with alarm to the upheaval on Wall Street that saw investment bank Lehman Brothers Holdings Inc. file for bankruptcy and Merrill Lynch & Co. sell itself to Bank of America Corp. But the Federal Reserve helped allays fears of further financial turmoil with an $85 billion emergency loan to shore up AIG, the huge US insurer reeling from billions of dollars in souring mortgage debt. The Fed said Tuesday it was acting after determining that a disorderly failure of the company, whose financial dealings stretch around the world, could hurt the already delicate markets and the economy. "It reinforces that policy makers in the US will do anything necessary to prevent a wholesale collapse of the financial system, no matter how much it costs," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. While somewhat disappointed by the Fed's decision to leave interest rates unchanged, investors were encouraged by Wall Street's rise overnight. The Dow Jones industrial average climbed 141.51 points, or 1.30 percent, to 11,059.02. The index plunged 504-points Monday, its biggest point drop since the September 2001 terror attacks. Japanese financials, which had been battered Tuesday, were mostly higher on the Fed's move, with Mitsubishi UFJ Financial Group Inc. rising 2.2 percent. The dollar was steady against the yen at 105.99 yen and the euro was little changed at $1.4159. Oil prices rose in Asian trading but remained well below $100 a barrel. Light, sweet crude for October delivery rose $2.85 to $94.00 on the New York Mercantile Exchange, after dipping as low as $90.51 Tuesday, its lowest level since Feb. 8.