Asian stocks soared on Tuesday after stellar gains on United States and European markets as investors welcomed a rescue of United States banking giant Citigroup and steps by governments to spur economic growth.
The US government bailout of Citigroup calmed fears of a repeat of the financial turmoil seen in September following the implosion of Wall Street icon Lehman Brothers due to huge losses on toxic mortgage debts.
“The bailout eased risks to the entire financial system,” said Hideaki Higashi, strategist at SMBC Friend Securities. “A sense of relief spread as the rescue plan erased fears of a repeat of the Lehman shock.”
Japan’s Nikkei index soared 4,24% by lunch. Stocks rose 4,8 % in Sydney, 5,7% in Seoul and 4,3%in Hong Kong.
On Monday the Dow Jones Industrial Average jumped 4,93% after the US government stepped in to avert a collapse of Citigroup, whose shares had slumped last week on bankruptcy fears.
But analysts warned that there might be more bad news in the pipeline after the US government agreed to rescue Citigroup, shouldering potential losses of up to $306-billion and injecting capital of $20-billion.
“Markets welcomed the bailout with a sigh of relief,” said Hachijuni Bank strategist Sho Komamura. “But uncertainty remains over what will happen next as no one had thought that Citigroup would need such a bailout.”
European stock markets posted gains of 10% on Monday as investors cheered the Citigroup bailout and a British economic stimulus plan worth $30-billion. — AFP