WASHINGTON (AFP) – Japan's Nikkei stock index has surged more than six percent in afternoon trade on Thursday as investors welcomed a weaker yen and an interest rate cut by the US Federal Reserve.
The US Federal Reserve building is seen in Washington, DC. The US Federal Reserve cuts its key lending rate half a point Wednesday to 1.0 percent in the latest move to ease a credit crisis that is strangling the US economy.
(AFP/Karen Bleier)The benchmark rose 501.62 points, or 6.11 percent, to 8,713.52, mirroring gains across Asia.
News of the gains in Asia trade come on the back of the US Federal Reserve announcement that it had sliced its key interest rate another 0.5 percentage points to 1.0 percent as signs emerged of thawing credit markets around the world.
The Fed's expected action came after China also chopped its benchmark one-year deposit rate by 27 basis points to 3.60 in a bid to spur economic growth, and expectations rose for rate cuts in Japan and Europe.
"Downside risks to growth remain" for the world's biggest economy, said the Fed's rate-setting committee in announcing the cut.
Ian Shepherdson, chief US economist at High Frequency Economics, said the Fed produced "a very downbeat statement, with all mention of upside inflation risks expunged from the record."
Signs of global financial stress were still everywhere.
The International Monetary Fund created a new short-term liquidity facility for countries battered by the crisis.
The IMF executive board said the emergency tool was "to establish quick-disbursing financing for countries with strong economic policies that are facing temporary liquidity problems in the global capital markets."
"Exceptional times call for an exceptional response," IMG Managing Director Dominique Strauss-Kahn said.
The US Fed announced its own temporary "swap" facilities with central banks in Brazil, Mexico, South Korea and Singapore to help those countries ease a credit squeeze.
Each would be provided up to 30 billion dollars in liquidity, it said, "in response to the heightened stress associated with the global financial turmoil, which has broadened to emerging market economies."
"The currency swap deal with the US Fed will help stabilize the local financial market," Bank of Korea governor Lee Seong-Tae told reporters.
"The swap deal will also contribute to stabilizing the currency market."
In Brussels, the European Commission moved to nearly double the maximum amount of EU aid that can be given to member states facing economic trouble to 25 billion euros.
And British finance minister Alistair Darling confirmed the relaxation of long-standing fiscal "golden rules" restricting government debt to under 40 percent of Gross Domestic Product (GDP).
"To apply the fiscal rules in a rigid manner today would be perverse. We would have to take money out of the economy, exacerbating an already difficult situation," he said in London.
But the collapse of a budget airline in Europe and a plunge in profits for Japan's Sony Corp., underlined the scale of the task facing policymakers.
Sony said its operating profit plunged 90 percent in the second quarter, hit by a surging yen, a weak global economy and intense price competition.
Denmark-based low-cost carrier Sterling Airways said it would file for bankruptcy because its cash-strapped Icelandic owner was unable keep it airborne.
German titan Lufthansa also reported a 75-percent nosedive in net profit, blaming high fuel costs and weakened sales.
Hungary meanwhile became the latest recipient of a 20 billion euro (25 billion dollar) IMF-coordinated bailout. The Hungarian market surged 8.2 percent and the forint currency rallied after the announcement of the rescue package.
Lawmakers in Ukraine approved legislation demanded by the IMF in exchange for an emergency loan worth 16.5 billion dollars.
And Swedish MPs voted through a 1.5 trillion kronor (195 billion dollar) plan to further shore up Sweden's financial sector.
Stockmarkets mostly closed higher: Tokyo's Nikkei main index soared 7.74 percent by the close, Australian shares were up 1.3 percent and Hong Kong's Hang Seng ended 0.8 percent higher.
In Europe the FTSE 100 index rose 8.05 percent and the CAC gained 9.23 percent. But the Frankfurt DAX fell 0.31 percent, dragged down by Volkswagen, whose shares had surged on Monday and Tuesday on news that Porsche had boosted its stake.
In the Americas, while the Dow and S&P 500 were slightly off, the tech-heavy Nasdaq improved 0.47 percent. Most Latin America markets rose, with Brazil's battered Bovespa higher by 4.37 percent.
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