Asian stocks rose sharply on Wednesday after an unusually large emergency interest rate cut overnight by the US Federal Reserve. Singapore's benchmark Straits Times index opened more than 3 per cent higher reversing two straight sessions of losses.

SINGAPORE

The benchmark Straits Times Index rebounded, advancing 109.45 points, or 3.81 per cent, to 2,976.00 when the market opened.

Some 41.4 million shares exchanged hands. Gainers beat losers 223 to 25.

TOKYO

JAPANESE share prices rose 3.7 per cent in early trade on Wednesday after the US Federal Reserve made a surprise steep rate cut to help boost the US economy and stop a global rout on the markets.

The benchmark Nikkei-225 index rose 470.18 points to 13,043.23 after opening. The broader Topix index of all first-section shares was up 44.04 points or 3.6 per cent to 1,264.58.

On Tuesday, Tokyo share prices tumbled 5.65 per cent to a 28-month low amid a global selloff on fears a US recession would hit the rest of the world.

The US Federal Reserve's rate cut helped stem massive losses seen around the world. Wall Street ended with moderate losses while European shares closed mainly higher a day after their worst session since 2001.

Traders said the cut of three-quarters of a percentage point was welcomed as a dramatic assertion that policymakers were prepared to make tough calls to bolster growth.

'The Fed's rate cut obviously made investors buy back stocks,' said Seiichi Suzuki, a market analyst at Tokai Tokyo Securities.

'The upward direction is expected to continue at least (through the) end of the day in Tokyo,' he said. 'But that doesn't mean the problems linked to the US subprime loans and fears (of a) US economic recession have disappeared.'

NEW YORK

US stocks skidded but averted a meltdown on Tuesday amid a global financial market panic that prompted an unprecedented 75-basis-point rate cut by the Federal Reserve.

The Dow Jones Industrial Average slid below 12,000 points for the first time since November 2006 but came off its worst levels, ending with a loss of 128.11 points, or 1.06 per cent, at 11,971.19.

The tech-heavy Nasdaq slumped 47.75 points, or 2.04 per cent, to 2,292.27 and the broad-market Standard & Poor's 500 index shed 14.69 points or 1.11 per cent, to close at 1,310.50 as the New York market saw its fifth straight losing session.

The Fed announcement of a surprise cut, the biggest since it began using the federal funds rate as a policy tool, helped stem heavy losses in European markets. In New York, the market came off its lows at the opening but failed to gain traction.

The Fed announcement 'failed to ease investor concerns that the US, and possibly the global economy, may already be in a recession,' said Mr Al Goldman at AG Edwards.

Since Monday, global markets were in a freefall amid worries that the US economy is moving into a recession that would hit the rest of the world.

European exchanges on Monday suffered their biggest one-day falls since the Sept 11, 2001, attacks on the United States.

On Tuesday, the main European shares rallied after news of the Fed action while Asian markets, which closed before the Fed announcement, plummeted for a second straight day.

China's main index shed 7.22 per cent, Sydney plunged 7.1 per cent, and Indian share prices closed down 4.97 per cent.

Wall Street market action came after the US central bank cut its base federal funds rate to 3.50 per cent early on Tuesday in an effort to stem a global financial crisis related to a collapse of the US property market.

'This major move might seem like a panic response to the plunge in stock prices, but it also makes sense,' said Mr Dick Green at Briefing.com.

Markets in a panic

'The markets are in a panic, and the Fed needed to respond in kind.' Markets have been disappointed by the economic stimulus plan proposed last week by US President George W Bush and see the White House action as confirmation that the world's biggest economy is headed for trouble.

'The notion that the rest of the world would be immune from a US slowdown was nonsense, and the rest of the world woke up to the fact that the chance of recession is more than 50-50,' said Mr Nariman Behravesh, chief economist at Global Insight.

Mr Behravesh said US and European markets 'are not that overvalued, but some of the emerging markets are, so I think it's not surprising that's where you see some of the biggest drops.'

Mr Kevin Giddis, bond market analyst at Morgan Keegan, said the Fed's emergency move and the White House rush to pass a stimulus package are signs that economic troubles are not yet over.

'These are not the things you typically do when you are not in, or feel strongly about, a recession,' Mr Giddis said.

'If we are indeed in a recession, it will take the Fed, the Treasury and all branches of the US government to act swiftly and decisively to head off a major economic headache. This might include bailing out a few banks and insurers too.' -- REUTERS, AFP

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