Global share prices rocketed on Thursday in the latest roller-coaster ride by stock markets this week amid lingering fears a recession will hit the US economy, the world's largest, in coming months.
Europe's leading share indices surged in early trade, with gains of between around 3 and 4 per cent, after a recovery for Japanese share prices and an overnight rebound on Wall Street raised hopes that the sharp slump on global markets was over.
But Hong Kong share prices reversed course and closed sharply lower on Thursday on news of a huge fraud and subprimerelated losses at French banking giant Societe Generale, dealers said.
"Volatility shows no sign of abating," said Matt Buckland of CMC Markets in London.
About 90 minutes after opening, London's FTSE 100 index of leading shares was up 2.86 per cent at 5,769.50 points and Frankfurt's DAX 30 had surged 4.93 per cent to reach 6,756.53. In Paris the CAC 40 jumped 4.24 percent to 4,833.58 points.
Tokyo's benchmark Nikkei-225 index rose 2.06 per cent to above 13,000 points, two days after it had slid under the key level for the first time in 28 months.
"Although it's too early to assess whether the troubles are over, the calming of US markets has positively affected Asian markets," said Shinichi Ichikawa, strategist at Credit Suisse First Boston.
Seoul finished up 2.1 per cent, Taipei gained 1.47 per cent and Sydney rose 3.1 per cent. However Hong Kong share prices closed down 2.3 per cent.
Trading in shares of Societe Generale was suspended on Thursday after the French banking gaint said a sole trader had been responsible for racking up $7.15 billion in fraudulent losses.
"Mood swings are very extreme," said Andrew Clarke, a sales trader at SG Securities in Hong Kong. "Most investors are still nervous about the US economy. They are still divided on where the US stock market is going."
World stock markets saw another tumultuous day Wednesday, as Wall Street roared back in a powerful late-day rally. European shares plunged following signals from the European Central Bank that eurozone interest rates were not about to come down.
But on Thursday Europe's main stock markets enjoyed a turnaround as the value of banking shares increased sharply. Banks have been among the worst hit companies as a result of the squeeze on global credit, which has been caused by a US home-lending crisis.
With global markets in turmoil on concern that fallout from the US housing market crisis will force the world's biggest economy into recession and possibly lead to a global economic slowdown, the US Federal Reserve on Tuesday slashed American borrowing costs.
The US central bank unexpectedly cut its base rate by 0.75 percentage points, the biggest decrease since the Fed began using the federal funds rate as its main policy tool in the 1990s.
It was the first unscheduled interest rate cut by the Fed since just after the September 11, 2001 attacks, when the US central bank moved to ease a global market rout.
On Wall Street, the Dow Jones Industrial Average closed up 2.5 per cent on Wednesday, surging back from opening losses of over 300 points.
The tech-heavy Nasdaq gained 1.05 per cent and the broad-market Standard & Poor's 500 index rose 2.14 per cent.
Markets expect the US central bank to follow Tuesday's cut by another cut of at least 25 basis points next Wednesday. The combined cut would be the steepest short-term reduction since 1982.
Investors were also to watch US President George W. Bush's State of the Union address next Monday for clues on whether there are more fiscal policies to come to ward off a recession.
"US markets rallied because of hopes on rescue policies," said Yutaka Miura, senior equity strategist at Shinko Securities.
"Unless they become reality markets remain sensitive and we can't stay calm." (AFP)
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