Global stocks soar on Citigroup rescue
Posted: 25 November 2008 1341 hrs

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TOKYO - Asian stocks soared Tuesday after stellar gains on US and European markets as investors welcomed a rescue of US banking giant Citigroup and steps by governments to spur economic growth.

The US government bailout of Citigroup calmed fears of a repeat of the financial turmoil seen in September following the implosion of Wall Street icon Lehman Brothers due to huge losses on toxic mortgage debts.

"The bailout eased risks to the entire financial system," said Hideaki Higashi, strategist at SMBC Friend Securities.

"A sense of relief spread as the rescue plan erased fears of a repeat of the Lehman shock."

Japan's Nikkei index soared 4.24 percent by lunch. Stocks rose 4.8 percent in Sydney, 5.7 percent in Seoul and 4.3 percent in Hong Kong.

On Monday the Dow Jones Industrial Average jumped 4.93 percent after the US government stepped in to avert a collapse of Citigroup, whose shares had slumped last week on bankruptcy fears.

But analysts warned that there might be more bad news in the pipeline after the US government agreed to rescue Citigroup, shouldering potential losses of up to 306 billion dollars and injecting capital of 20 billion dollars.

"Markets welcomed the bailout with a sigh of relief," said Hachijuni Bank strategist Sho Komamura.

"But uncertainty remains over what will happen next as no one had thought that Citigroup would need such a bailout."

European stock markets posted gains of 10 percent Monday as investors cheered the Citigroup bailout and a British economic stimulus plan worth 30 billion dollars.

US president-elect Barack Obama pledged Monday to work with global leaders to tackle the financial crisis.

"The reality is that the economic crisis we face is no longer just an American crisis, it is a global crisis -- and we will need to reach out to countries around the world to craft a global response," Obama said, unveiling his economic team for his administration.

Obama confirmed the well-travelled Timothy Geithner as his nominee for Treasury secretary, and the internationally respected former Treasury boss Larry Summers as his top economic adviser in the White House.

"The nominations were well received by markets due to their reputation and experience," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong.

Obama, who takes office on January 20, said the US economy was trapped in a "vicious cycle" but touted a plan to create 2.5 million jobs through a spending spree on national infrastructure.

Outgoing US President George W. Bush again pledged that his administration was ready to take all necessary measures to shore up the struggling US economy, while the Treasury extended money market guarantee programmes.

"The policy measures triggered a turnaround in investor sentiment and allowed risk appetite to return," noted Kowalczyk, who believes that US stock markets finally hit a bottom last week.

The International Monetary Fund said its executive board had approved a credit of 7.6 billion dollars for Pakistan, the Fund's first rescue in Asia since the global financial crisis began.

The yen rose while the euro gave back some of its strong gains triggered a day earlier by the Citigroup bailout.

The dollar fell to 96.60 yen, down from 97.23 late Monday in New York. The euro dropped to 1.2858 dollars from 1.2928, and to 124.22 yen from 125.71. - AFP/vm