Asian shares rebound on heels of Wall Street
Posted: 03 December 2008 1737 hrs

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TOKYO : Asian shares clawed back some ground after Wall Street rebounded overnight on hopes of a US government rescue for ailing automakers.

The Asian recovery from heavy losses the previous day was relatively modest and dealers said it was driven largely by technical factors, with sentiment still cautious following a recent flood of grim economic data.

Tokyo closed up 1.79 percent, Hong Kong climbed 1.4 percent, Sydney edged up 0.2 percent and Seoul ended flat.

In early European trade, London was down 0.43 percent, Frankfurt shed 1.59 percent and Paris lost 1.16 percent.

"Equity markets continue to gyrate," said Barclays Capital analyst Laurent Fransolet. "The news continues to be mixed, but the responses of various authorities seem to be viewed a bit more positively."

Wall Street snapped back Tuesday from a brutal session a day earlier, with sentiment lifted by a better-than-expected outlook from General Electric and hopes for a US rescue for ailing Detroit automakers, traders said.

"The market continues to be influenced by US stocks, reversing recent losses slightly after the Big Three (carmakers) put forward their revamp plans," said Hideaki Higashi, a strategist at SMBC Friend Securities.

Higashi however said automakers Chrysler, Ford and General Motors still faced a bumpy road to clear negotiations with Congress before they get a bailout.

"The rescue plan could be diluted from what they want," he warned.

"There are calls for the management to take responsibility and protect payrolls in the auto sector, which is considered the soul of America, unlike financial companies," he said.

Wall Street, which reopens at 1430 GMT, was also boosted overnight by General Electric's better-than-expected business update.

The Dow Jones Industrial Average rallied 3.31 percent, the tech-heavy Nasdaq composite climbed 3.70 percent, and the Standard & Poor's 500 added 3.99 percent after shedding more than eight percent on Monday.

European stocks meanwhile fell Wednesday despite news that finance ministers from all 27 European Union nations endorsed plans for a stimulus package totalling 200 billion euros (260 billion dollars), equivalent to 1.5 percent of EU gross domestic product.

Investors are looking to central banks this week for the latest round of action to combat the worst financial crisis since the 1930s and which is threatening to plunge the global economy into recession.

The European Central Bank and the Bank of England are both widely expected to slash interest rates on Thursday.

Economic news remained gloomy. Australia's economy grew just 0.1 percent in the third quarter -- its slowest pace in eight years, official figures showed.

"It is difficult to see the rally in equities being sustained and it will not take much in the way of more bad economic news to bring a dose of reality back," warned analysts at the Calyon investment bank.

There were also signs that the Chinese economy is slowing. The yuan fell by its maximum daily trading limit for a second consecutive day Tuesday.

The sudden drop in the value of the Chinese currency may signal a policy shift to prop up exports during the financial crisis, analysts said.

- AFP /ls