World stocks surge on recovery hopes

Stock markets rose around the world yesterday on tentative hopes of economic recovery in the United States, but analysts warned that the upbeat bull market was likely to be short-lived.

Wall Street last week enjoyed a stunning comeback from 12-year lows and it rose further yesterday, with the Dow Jones Industrial Average climbing 1.76 per cent and the Nasdaq index inching up 0.62 per cent.

In Europe, the Paris CAC 40 index shot up 3.18 per cent - pushed higher by banking shares such as BNP Paribas and Société Générale, while London's FTSE 100 rose 2.94 per cent and the Frankfurt DAX added 2.30 per cent.

Japanese shares ended at a one-month high by climbing 1.78 per cent to close at 7,704.15 points. There were also large gains for indices in Mumbai, Shanghai and Hong Kong, where the stock market rocketed up 3.60 per cent.

The sharp rise came after encouraging comments by US Federal Reserve chairman Ben Bernanke and a vow by finance ministers from the G20 developed and emerging economies to take "whatever action is necessary" against the crisis.

In a television interview, Bernanke told CBS last Sunday that no more big banks would fail and he expressed confidence the world was not about to see a repeat of the Great Depression of the 1930s.

"We're working on it. And I do think that we will get it stabilised, and we'll see the recession coming to an end probably this year," he said.

"We'll see recovery beginning next year, he added.

Mr Bernanke said a government fund of $500 billion (€384 billion) was stabilising the mortgage market and business lending was picking up.

"I think as those green shoots begin to appear in different markets, and as some confidence begins to come back, that will begin the positive dynamic that brings our economy back," he said.

But analysts cautioned that a recovery was not around the corner.

"It will take better news on the economic and/or financial front for the more optimistic tone to be sustained," said Mitul Kotecha, an analyst at French investment bank Calyon, who said global banks were still far from healthy.

Referring to stock market gains in recession-hit Japan, which launched talks on a new economic stimulus plan to beat the crisis yesterday, Hiroyuki Fukunaga, chief executive of research firm Investrust, warned against all the hype.

"The market is still fragile, so we shouldn't be overly optimistic," he said, adding that yesterday's stock market increases "were not based on economic recovery, but merely optimism."

But investors welcomed Finance Minister Kaoru Yosano's remarks at a G20 meeting in Britain over the weekend that Japan's fiscal stimulus measures would exceed two per cent of gross domestic product.

Dealers said his pledge to ease financing pressures on companies ahead of the financial year to March gave a boost to struggling lenders such as Shinsei Bank, which leapt 17 per cent to 95 yen.

In London, the share price of Barclays bank soared 22.67 per cent to 90.90 pence after the British group said it was in talks over the sale of its asset management business iShares and was negotiating with the British government on a plan to provide guarantees for risky assets.

Reports said the sale could raise £4 billion (€4.4 billion).

"The sale talks are somewhat of a surprise as management had indicated this business as being core to (the) group for several years now," said Alex Potter, an analyst with London-based investment bank Collins Stewart.

"However, tough markets evidently lead to tough decisions being taken."