World stock markets mostly higher, Japan’s Nikkei jumps 1.5 percent after surprise rate cut

By Pamela Sampson, AP
Tuesday, October 5, 2010

World markets mostly higher, rate cut lifts Japan

BANGKOK — World stock markets mostly posted modest gains Tuesday as investors weighed a surprise rate cut in Japan against a credit agency warning that Ireland’s debt rating may be downgraded.

Japan’s benchmark jumped 1.5 percent during an otherwise lackluster session in Asia. Markets in Europe were higher though optimism was restrained by Moody’s warning it may cut Ireland’s debt rating amid mounting worries over the country’s economy following another bank bailout last week.

Oil prices held above $81 a barrel as traders looked for a new catalyst to extend last week’s rally. The dollar fell against the yen and the euro.

London’s FTSE 100 advanced 0.6 percent to 5,589.78. Germany’s DAX rose 0.3 percent to 6,151.98. The CAC-40 in Paris was up 0.7 percent to 3,675.96. Wall Street was set to gain with Dow futures higher by 0.3 percent, or 29 points, at 10,736.00.

Tokyo’s Nikkei 225 stock average rose out of negative territory after the Bank of Japan cut its key interest rate to a range of zero to 0.1 percent and said it may set up a $60 billion fund to buy government bonds and other assets, hoping to boost a faltering recovery and deflate the strong yen. The index closed up 137.70 points, or 1.5 percent, at 9,518.76.

Elsewhere in Asia, traders refrained from major moves ahead of some potentially important events for stocks, including Friday’s U.S. monthly jobs survey and earnings Thursday from Dow industrials component Alcoa Inc., which traditionally kicks off the quarterly earnings season.

Hong Kong’s Hang Seng index added 0.1 percent to 22,639.14 and South Korea’s Kospi was fractionally lower at 1,878.94. Australia’s S&P/ASX 200 shed 0.4 percent to 4,606.90, reducing losses after the country’s central bank left its main interest rate unchanged.

Analysts said Wall Street provided the main drag on the region’s stocks amid weak economic indicators. There is also a sense that the Federal Reserve’s efforts to pump up the economy and lower the unemployment rate, stuck at almost 10 percent, have fallen short.

“Overall the market is still pretty flat,” said Jackson Wong, vice president of Tanrich Securities in Hong Kong. “Negative sentiment from the U.S. provided an excuse for investors to take profits.”

Wong also said that the dollar’s rebound — on Monday it rose from a six-month low against the euro — led investors to avoid riskier assets like stocks and seek out the safety of the greenback.

The Australian central bank’s decision also helped renew interest in the U.S. dollar, Wong said. Markets had expected the central bank to hike its main interest rate, which would have made Australian dollar assets like bonds or deposits relatively more attractive.

In New York on Monday, the Dow Jones industrial average fell 0.7 percent to close at 10,751.27. The index lost nearly 80 points after factory orders fell 0.5 percent in August — slightly more than expected — and contracts for new homes remained far below last year’s pace.

The broader Standard & Poor’s 500 index fell 0.8 percent to 1,137.03, and the Nasdaq composite index shed 1.1 percent to 2,344.52.

In currencies, the dollar fell to 83.32 yen from 83.59 yen late Monday in New York. The euro rose to $1.3777 from $1.3665.

Benchmark oil for November delivery was up 17 cents to $81.65 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 11 cents to settle at $81.47 on Monday.

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