World markets rally on easing U.S. fears

updated 10:35 a.m. ET March 25, 2008

BANGKOK, Thailand - European and Asian markets surged Tuesday as investors returned from the Easter holiday in a mood to buy, encouraged by upbeat U.S. housing numbers and overnight gains on Wall Street.

However, Wall Street retreated Tuesday morning after a disappointing reading on consumer sentiment punctured some of the optimism of the past two sessions.

Overseas investors were heartened by news that JP Morgan Chase & Co. raised its offer for Bear Stearns fivefold to $10 a share from $2 a share. The new offer signals that investors’ losses might not be as sizable as feared.

“Yesterday saw strong gains on Wall Street with the Dow Jones closing up 187 points, putting on over 400 points since Thursday afternoon,” said Claire Collingwood, a dealer at CMC Markets in London. “A re-evaluation of the Bear Stearns deal price by JP Morgan gave investors added belief that the credit crunch was coming to an end.”

In Europe, stocks advanced strongly as markets reopened after the Easter Monday holiday. In Asia, markets in Hong Kong and Australia, both of which had been closed since Thursday for the Easter holiday, jumped on easing concerns about the global credit crisis that has battered stocks since the start of the year.

“I think this is the beginning of a rally,” said Francis Lun, a general manager at Fulbright Securities in Hong Kong. “We have gone down low enough and the market is ready for a rebound. Banks will lead the rally.”

Hong Kong’s benchmark Hang Seng index jumped 6.4 percent to 22,464.52, while Australia’s S&P/ASX 200 index rose 3.7 percent to finish at 5,318.4.

Japan’s Nikkei 225 index climbed 2.2 percent to 12,745.2 after closing flat Monday, and India’s Sensex was up more than 6 percent in late afternoon trading.

Investors got an unexpected dose of positive news about the U.S. housing sector, which has been at the heart of the credit problems. The National Association of Realtors said Monday sales of existing homes rose 2.9 percent in February, the first gain since July.

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The Dow Jones industrial average rose 187.32, or 1.52 percent, to 12,548.64 on Monday, after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.

In Tokyo, electronics and trading companies were buoyed by the recent recovery in the U.S. dollar, which was trading at 100.20 yen. Last week, it dropped below 96 yen for the first time since August 1995. Gainers in Tokyo included Canon Inc., which rose 3.9 percent, and Itochu Corp., up 4.8 percent.

In Australia, banks led the market higher. National Australia Bank, the nation’s largest lender, rose 5.1 percent, while Australia and New Zealand Banking Group added 5.9 percent.

Still, some analysts warned that the declines in regional markets may not be over.

“It’s too early to conclude an end of the prevailing bear market,” said Ernie Hon, a strategist at ICEA Securities in Hong Kong.

The mainland Chinese market recovered from an early drop to close nearly flat, as a rally in airlines offset a continued decline in PetroChina on views the stock is overvalued. The Shanghai Composite Index rose 0.1 percent to 3,629.62.

Speculation that China’s central bank may hike interest rates again continues to dampen buying sentiment, analysts said.

Taiwan bucked the regional trend. Its main index slid 0.8 percent after surging 4 percent Monday amid expectations that president-elect Ma Ying-jeou will bring greater economic engagement with China.

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