World Markets Up Strong On China Stimulus

Stocks gained in Europe and Asia on Monday, a day after the Chinese government announced an extensive economic stimulus plan

Asian markets surged. The Shanghai Stock Exchange composite index rose 7.2 per cent, and the Hang Seng rallied 3.5 per cent, with Anhui Conch Cement, China’s leading cement maker, up 24 per cent in Hong Kong. The Tokyo benchmark Nikkei 225 stock average rose 5.8 per cent, despite news that core private-sector machinery orders in Japan fell 10.4 per cent in July to September, the biggest drop in years.

In Sydney, the S&P/ASX rose 1.4 per cent, helped also by hints from the Australian central bank that it might deliver yet more rate cuts to ease credit conditions. The bank on Monday said it now expected the Australian economy to grow only by 1.5 per cent this year, rather than the previously-forecast 2 per cent; for 2009, it sees growth of just 1.75 per cent, rather than 2.5 per cent…

 

Although analysts had been expecting China to announce a major stimulus package, they had not been expecting anything of this magnitude. “That is much more aggressive than I expected,” said Frank Gong, an economist with J.P. Morgan in Hong Kong. “That’s a lot of money to spend.”

U.S. crude oil futures for December delivery rose $2.32 to $63.36 a barrel.

The dollar was lower against major European currencies. The euro rose to $1.2861 from $1.2718 late Friday in New York, while the British pound rose to $1.5741 from $1.5642. The dollar fell to 1.1729 Swiss francs from 1.1787 francs. But the U.S. currency rose to 99.26 yen from 98.24.

The so-called Ted spread, the gap between yields on safe three-month United States government securities and the rate that banks charge each other for loans of the same duration, was unchanged at 2.01 percentage points. That level represents a huge improvement from the worst days of October, when it stood at 4.6 points, but is still above the more historically normal range of 0.5 point to 1 point.

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