Rallies in Europe inspire confidence

By Adam Haigh  |   2008-11-11  |     NEWSPAPER EDITION

STOCKS rose in Europe yesterday and Asia and United States index futures climbed after China unveiled a US$586-billion plan to stimulate the economy and world leaders urged more cuts in interest rates. Oil and copper rallied, while the yen fell.

China's CSI 300 Index jumped 7.4 percent, and Japan's Nikkei 225 Stock Average surged 5.8 percent. BHP Billiton Ltd, ArcelorMittal and ABB Ltd added more than 13 percent in Europe. The yen slipped 1.7 percent against the euro on speculation China's package will give investors confidence to buy higher-yielding assets using money borrowed in Japan.

"This is very encouraging," said Virginie Maisonneuve who helps oversee US$19 billion as head of global equities at Schroder Investment Management in London. "We need a speedy implementation. From a sentiment standpoint and in terms of planning ahead, this will create a positive shift." She spoke in a Bloomberg Television interview.

The MSCI World Index increased 1.6 percent to 954.42 at 12:13pm in London, trimming this year's drop to 40 percent. The International Monetary Fund predicts global growth will slow to 2.2 percent in 2009 from 3.7 percent this year, meaning a world recession under the fund's informal definition - growth of 3 percent or less.

Yen declines

Europe's Dow Jones Stoxx 600 Index advanced 2.4 percent, and futures on the Standard & Poor's 500 Index climbed 2.1 percent. The MSCI Asia Pacific Index added 3.3 percent.

The yen fell 1.7 percent to 127.24 per euro, and it declined to 98.98 from 98.24 against the dollar.

China's government announced infrastructure spending, tax deductions and farming subsidies. The central bank has already cut interest rates three times in two months, joining policy makers from Washington and Tokyo to Frankfurt and London in efforts to lower borrowing costs and inject cash to avoid recession.