Japan's Nikkei index closed 7.74% up at the end of trading following a strong rally at Wall Street overnight. The rise was helped by a weaker yen and hopes for an interest rate cut at the end of the week.
An expected US rate cut and hopes of a similar move in Japan lifted Asian markets to a second day of gains Wednesday but more bad economic news suggests the global crisis is far from over.
Tokyo's Nikkei stock index soared 7.74 percent by the close, Australian shares were up 1.3 percent after falling back from strong early gains and Hong Kong's Hang Seng ended the morning 1.4 percent higher.
But South Korea bucked the trend, with shares closing 3.0 percent lower after a highly volatile session.
Tokyo's market was helped higher by a weaker yen, helping exporters, on the back of the rates speculation.
Although the Japanese currency rebounded slightly against the dollar it was trading well off highs earlier this week.
The dollar was at 96.57 yen in Tokyo afternoon trade, down from 97.47 in New York late Tuesday. The euro fell to 122.21 yen from 124.33 but climbed to 1.2643 dollars from 1.2597.
The yen had been hovering around the low 90s against the dollar and around the 118 mark to the euro on Monday.
The activity on the Asian markets, following an 11 percent surge on Wall Street overnight, came as the US Federal Reserve held a two-day meeting, after which it is widely believed it will announce a cut in interest rates.
And in Japan, a report said the central bank was "leaning toward" a reduction.
"It appears that expectations for imminent interest rate cuts by the major central banks and some signs that the credit freeze is thawing overwhelmed more bad news on economic growth," said NAB Capital analyst John Kyriakopoulos.
"Central banks around the world are now taking more decisive monetary policy action to cushion the slump in economic activity."
Some analysts, however, expressed surprise at the sharp upturn, saying that bargain hunting and a massive buying rush by "short sellers" who had bet on lower prices helped fuel the advance.
The US Federal Open Market Committee headed by chairman Ben Bernanke was expected to announce its decision at about 1815 GMT Wednesday, with financial markets banking on a half-point cut to 1.0.
"The Fed is hoping that low rates, along with efforts to increase liquidity, will spur greater lending and borrowing, unfreezing credit markets," said Augustine Faucher at Moody's Economy.com.
But some analysts say the move would be largely symbolic because the actual rate of overnight interbank loans is in fact well below the Fed target following extraordinary efforts to pump liquidity into a strained banking system.
The Nikkei business daily said Japan's central bank is considering cutting its super-low interest rates by 25 basis points to 0.25 percent on Friday -- the first such move since March 2001.
Analysts said that a rate cut in Japan now seemed likely and markets would be disappointed if the BoJ does not act.
"The rise in share prices seen even in the US suggests the possibility of a sharp negative reaction if the BoJ now fails to cut rates -- a situation that could force the bank's hand," said Barclays Capital analysts.
In the latest gloomy economic news, Japan's Sony Corp. said Wednesday its operating profit plunged 90 percent in the second quarter, hit by a surging yen, a weak global economy and intense price competition.
And although official figures showed industrial output rose 1.2 percent in September from the previous month, beating expectations, it followed a 3.5 percent drop in August as well as forecast falls of 2.3 percent in October and 2.2 percent in November.
Further bad news loomed with the OPEC cartel warning it may again cut oil production as prices tumble, shrugging off criticism from Britain and the United States.
In further signs of the weakening US economy, Gannett, the country's largest newspaper chain, slashed more jobs and the 100-year-old Christian Science Monitor axed its print edition as circulation and advertising revenues plunge.
An industry report also showed that US visits to online shops were sinking along with consumer confidence, which is at a record low, as retailers brace for a lean Christmas.
Elsewhere, the leaders of France and Britain called for international intervention to protect eastern Europe's emerging economies as Hungary warned its economy could contract by as much as one percent next year.
The US Federal Reserve also said it had extended a temporary 15-billion-dollar currency swap line to New Zealand's central bank to help it boost lending and ease the global credit crunch.
Date created : 2008-10-29