TOKYO, October 14 – Japan and Australia moved Tuesday to shore up consumer and investor confidence, as governments around the world took new steps to ease the global financial crisis — and saw stocks soar in response.
The surge in markets was welcome news after weeks of turmoil that have seen trillions of dollars wiped off share values, but analysts warned that the crisis was far from over amid continuing fears of a global recession.
Australia launched a 7.25 billion US dollar economic stimulus package while Japan relaxed restrictions on companies buying back their own shares, looking to address the worst crisis in world finance since the Great Depression.
Australian Prime Minister Kevin Rudd said the stimulus package was intended to address concerns that the crisis was moving beyond dramatic losses in share values to pose a threat to his country\’s solid economic growth.
"The global financial crisis has entered into a new dangerous and damaging phase, one that goes to the real economy — growth and jobs," Rudd said.
Japanese stocks rose 14 percent and Australian shares were up 3.7 percent, following big gains around the globe Monday in the wake of new measures by world leaders to unfreeze blocked credit flows and inject money into markets.
"We\’ve seen phenomenal gains," said Adrian Leppinus of Cameron Securities in Australia. "There\’s been a mad rush for people to get back in."
The London stock market opened up 2.65 percent on Tuesday, Frankfurt\’s DAX was up 1.44 percent at the open and the CAC 40 on France was up 2.15 percent.
But markets around the world are still sharply down for the year, and analysys have cautioned that the situation remains uncertain, with wild fluctuations common in the recent months of turmoil.
In 2008, the Japan and Hong Kong stock markets are off about 38 percent, the US Dow Jones has shed 29 percent and London\’s FTSE 100 is down 31 percent.
"The markets had been saying it was necessary to inject public funds into troubled financial institutions and countries have moved to do that," said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC in Japan.
But he added: "Even if sentiment recovers for now, it can worsen again because of concerns about the economy."
US President George W. Bush and Treasury Secretary Henry Paulson were to unveil details later Tuesday of a comprehensive rescue package that includes investing hundreds of billions of dollars in several troubled banks.
In its boldest move yet to fend off the crisis, the US Treasury is expected to announce a plan to invest 250 billion dollars in potentially thousands of American banks, including the nation\’s largest.
Bush on Monday promised "responsible, decisive action to restore credit and stability and return to vigorous growth."
Paulson meanwhile was to outline "a series of comprehensive actions to strengthen public confidence in our financial institutions and restore functioning of our credit markets," the Treasury Department said.
"We are designing a standardised program to purchase equity in a broad array of financial institutions," said Neel Kashkari, the US official in charge of the country\’s 700-billion-dollar bank bailout package.
Wall Street surged Monday on the latest developments, jumping more than 11 percent in the Dow\’s biggest points gain on record.
Markets were also cheered by trillion-dollar rescue packages in Europe, with governments working in concert to stem the crisis.
Britain pumped 37 billion pounds (47 billion euros) into three struggling banks, while Germany, France, Spain, and Austria Monday pledged a total of 1.03 trillion euros (1.4 trillion dollars) for troubled financial institutions.
The package announced by Germany alone included 400 billion euros in loan guarantees and 80 billion euros in fresh capital, while France said it would guarantee up to 320 billion euros of lending between banks.