Asian stocks stage strong early rally

Markets took up the baton after Wall Street's rise

Asian stocks rallied strongly in early trade Wednesday, swinging back into positive territory after gains on Wall Street and in Europe overnight. 

Global stocks began the week with huge losses in the wake of Standard and Poor's unprecedented US credit downgrade, which triggered a wild ride for investors worldwide.

But markets had a better day Tuesday, with the Dow Jones Industrial Average gaining 430 points, or 3.98 percent, to close at 11,239.77 while European shares also bounced back after falling as much as six percent.

The rebound came despite disappointment over the lack of any announcement on further quantitative easing by the US Federal Reserve.

Instead, the Fed's policy-setting Federal Open Market Committee said that it expected to maintain interest rates near zero for "at least" the next two years due to economic weakness.

Asian markets took up the baton after Wall Street's rise, with share prices up sharply in Japan.

The benchmark Nikkei-225 index of the Tokyo Stock Exchange was up 154.18 points or 1.72 percent at 9,098.66 after the first 20 minutes of trading.

"Market sentiment hasn't stabilised yet, so while we'll likely see a relief rally today, it'll be a rocky path to recovery," Toshiyuki Kanayama, market analyst at Monex, said.

South Korean shares also gained, opening 4.22 percent higher Wednesday after the US Federal Reserve pledged to keep interest rates low.

The decision to ban the short-selling of all listed stocks for three months effective from early Wednesday, also helped to cool the selling frenzy.

"But it's hard to estimate the extent of anticipated KOSPI gains for the day, given such steep losses in recent days and the (Dow's) surge," Tong Yang Securities analyst Lee Jae-Mahn told Dow Jones Newswires.

Australian shares, which staged a stunning turnaround Tuesday to fully recover from a slump of more than 5.5 percent, surged a further 3.0 percent in early trade.

"It's a much more pleasant open to Australian trade today as stocks follow the big snap-back rally on Wall Street," said IG Markets analyst Ben Potter.

"Whilst it is very positive to see the gains, the big question is going to be how long the rally lasts before participants are faced with the question of whether this is just a bounce, like it usually is, or is actually a meaningful bottom."

After dropping back below parity with the greenback for the first time since March on Tuesday, the commodities-linked Australian dollar also continued its comeback. In early trade it was at 103.18 cents, up from 102.25 cents Tuesday.

But the greenback firmed against other major currencies, changing hands at 77.07 yen in early Asian trade, up from 76.94 yen in New York late Tuesday, while the euro edged down to ê1.4362 from ê1.4374.

 

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