TOKYO: Asian shares extended their rally on Wednesday in the wake of Wall Street's massive rebound as the U.S. Congress appeared closer to passing a US$2 trillion stimulus package to mitigate the economic blow from the coronavirus pandemic.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.7per cent with Australian shares jumping 3.4per cent and South Korean shares gaining 3.5per cent. Japan's Nikkei surged 4.8per cent.
"Japanese shares have been bolstered by aggressive buying from the Bank of Japan and pension money this week. That has prompted hedge funds to cover their short positions," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
On Tuesday, MSCI's gauge of stocks across the globe rallied 8.39per cent, the largest single-day gain since the wild swings seen during the height of the global financial crisis in October 2008. It rose another 0.8per cent in Asia on Wednesday.
On Wall Street, the Dow Jones Industrial Average soared 11.37per cent, its biggest one-day percentage gain since 1933.
Yet, much of the large gains in stock markets pale in comparison with the brutal selloff of the past few weeks as investors braced for a deep global recession in the wake of sweeping lockdowns in many countries.
U.S. S&P500 is still down almost 28per cent from its record peak hit just over a month ago. Wall Street futures were down 1.1per cent in early Asian trade.
"Many analysts have recently put out dire economic forecasts, like annualized rate of 20per cent fall in U.S. GDP next quarter. Europe and Japan should also see double-digit contractions," said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.
"I suspect the outlooks have sunk in among market players already and that the bear market has run about 80per cent of its course for now."
Senior Democrats and Republicans in the divided U.S. Congress said on Tuesday they were close to a deal on a US$2 trillion stimulus package to limit the economic damage from coronavirus pandemic. But it was unclear when they would be ready to vote on a bill.
Investor fears about a sharp economic downturn appear to be easing somewhat after the U.S. Federal Reserve's offer of unlimited bond-buying and programs to buy corporate debt.
"Companies will see their revenues sink and indebted firms will have trouble securing cash, so governments are making the right responses," said Akira Takei, senior fund manager at Asset Management One.
"The question is, while those responses are necessary in the near term, what if this continues? You can't keep helping companies that continue to make losses. The longer this drags on, the more likely we will need to adjust to a new normal."
The biggest uncertainty is on how countries can slow the pandemic and how quickly they can lift various curbs on economic activity.
U.S. President Donald Trump pressed his case for a re-opening of the U.S. economy by mid-April.
But that met immediate scepticism given the rise of infections in the United States is now among the highest in the world, with the total cases reaching more than 50,000, doubling in less than 3 days recently.
In particular, its financial hub of New York City suffered another quick and brutal rise in the number of infections to around 15,000, raising worries about shortage of hospital beds.
In the currency market, the dollar has slipped as a greenback liquidity crunch loosened slightly.
The euro traded at US$1.0808 up 0.15per cent after four straight days of gains.
The dollar dropped 0.3per cent against the yen to 110.85
, off a one-month high of 111.715 touched the previous day.
Gold ticked up 0.3per cent to US$1,614.5 per ounce after having soared almost 5per cent, its biggest gains since 2008, on Tuesday. It was in part helped by concerns lockdowns in major producer South Africa could disrupt supply.
Oil prices bounced back as hopes for U.S. stimulus offset fears of falling global demand.
India, the world's third largest oil consumer, ordered its 1.3 billion residents to stay home for three weeks, the latest big fuel user to announce restrictions on social movement, which have destroyed demand for gasoline and jet fuel worldwide.
The market remained pressured by a flood of supply after Saudi Arabia started a price war earlier this month, a move that dealt a crushing blow to markets already reeling from the pandemic.
U.S crude futures rose 4.5per cent to US$25.10 per barrel. That is up about US$5.5, or almost 26per cent, from their 18-year intraday low of US$19.46 touched on Friday. Still on the month, the market is down 44per cent.
(Editing by Sam Holmes & Shri Navaratnam)