By Louise Heavens
SINGAPORE, Jan 23 (Reuters) - Major Asian share markets
rallied, with Sydney surging 7 percent on Wednesday after the
Federal Reserve's biggest interest rate cut in over two decades
tempted investors to beaten-down equities, but recession fears
lingered.
The dollar extended its losses against the euro in early
Asian trade after the Fed's emergency 75 basis-point interest
rate cut wiped out the U.S. currency's yield advantage over its
the European one.
Industrial metals, such as copper <MCU3>, recovered some
lost ground after hefty falls this week on fears a U.S.
recession could derail demand.
The global stock market rout began early this week,
triggered by concerns global economic growth was hitting a wall
and financial institutions had more subprime-related writedowns
to reveal.
In an effort to shore up markets, the U.S. central bank
slashed rates to 3.5 percent on Tuesday. Mirroring the move,
the Hong Kong Monetary Authority cut its base rate by 75 basis
points to 5.00 percent.
Some said the Fed's decision -- a week before a scheduled
rate meeting -- smelled of panic.
"A lot of people see that the Fed's move yesterday was too
little," said Hideaki Inoue, forex manager at Mitsubishi UFJ
Trust and Banking in Tokyo.
"But given that they cut just a week before this month's
meeting, it does show that the Fed realises things are bad."
But for now, investors were in the mood to seek out
bargains, encouraged by the recovery on Wall Street, where
benchmarks managed to recover from their lows after a feverish
trading session on Tuesday.
Australia staged a dramatic comeback, where shares rose
almost 7 percent -- on course for their biggest daily gain in a
decade. The S&P/ASX 200 index had fallen 12 sessions in a row.
"This market traditionally has been more defensive than the
overseas markets, and it's been pretty badly hit over the last
few days," said Leigh Gardner, ABN AMRO's head of sales
trading.
Miner BHP Billiton Ltd <BHP.AX> led the way, soaring 9.5
percent after a strong second-quarter production report.
In Tokyo the Nikkei <> surged 3.6 percent, recovering
from it biggest one-day loss since the Sept. 11 attacks on the
United States. The index is still down 15 percent just this
month alone.
Seoul's KOSPI <> regained its poise following the
2-day sell-off, adding 2.9 percent.
BEAR'S SHADOW
Wall Street's benchmark indexes still hover close to bear
market territory and the prospect of a U.S. recession still
looms.
The blue-chip Dow average <> ended down about 1 percent
-- way above earlier lows but still 15.5 percent from its
October closing high above 14,000. The Nasdaq <> closed
down 19.8 percent from its October 2007 closing high.
On Tuesday, the International Monetary Fund warned a
significant slowdown in 2008 world economic growth appears
inevitable, and the restoration of financial markets is
expected to be a complex and long-drawn-out task. An IMF
spokesman, Masood Ahmed, said the Fed cut was "appropriate and
helpful.
"The volatile weakening experienced in many equity markets
during the past few days has underscored the burden that the
current financial market turmoil represents for the global
growth outlook," he said in a statement. []
In the money markets, the euro <EUR=> climbed as much as
0.4 percent to the day's high of $1.4685 in early Tokyo trade,
extending its rally after surging 1.3 percent on Tuesday, its
biggest one-day percentage gain since early 2006.
Japanese government bonds gained, pushing the two-year
yield closer to the Bank of Japan's overnight rate target on
mounting expectations for a rate cut later in the year.
Analysts said the JGBs were posting gains on doubts over
whether Japanese stock markets would be able to sustain a 3
percent jump after the Federal Reserve's emergency slash.
The two-year yield <JP2YTN=JBTC> fell 2.5 basis points to
0.500 percent by 0051 GMT.
(Editing by Valerie Lee)
