TOKYO, December 8 – Asian stocks soared Monday as hopes grew for fresh action by the US authorities to fight a deepening recession in the wake of massive job losses.
There were also signs that crisis-hit US carmakers may finally secure financial lifelines to avert an industry collapse that threatens to send the world\’s largest economy deeper into a slump.
Wall Street rebounded Friday despite news that the US economy lost more than half a million jobs in November, adding to concerns about the depth of a recession that is spreading worldwide.
"Job losses of this magnitude dismiss the notion this recession\’s just another blip that will blow over soon," said Jan Lambregts, head of Asia research at Rabobank International.
"They should also prove constructive ground for further policy action, both on the monetary and fiscal front," he added, predicting another cut in US interest rates next week.
That helped Asian markets to start the week on an upbeat note. Shares surged 7.5 percent in Seoul by the close, 5.2 percent in Tokyo and 4.1 percent in Sydney. Hong Kong was up 7.5 percent by lunch.
"A few people are trying to bottom-pick," while hopes are growing that president-elect Barack Obama will take steps to revive the US economy, Goldman Sachs JBWere senior trader Patrick Crabb told Dow Jones Newswires.
"We may see a bit of a bear market rally in December and a bit of Obama euphoria, but the world\’s still a very ugly place in the first half of 2009," he added.
On Friday in New York, the Dow Jones Industrial Average gained 3.09 percent, rebounding from early losses after news that the US economy lost 533,000 jobs in November and the unemployment rate hit a 15-year high of 6.7 percent.
The grim report initially pushed US stocks lower on fears of a "deep and prolonged US recession," noted NAB Capital strategist John Kyriakopoulos.
However, investors later had a change of heart "on hopes that government policy action and the sharp fall in the crude oil price will provide a cushion to the economy," he added.
Markets were looking ahead to data due this week on the US retail sector, crucial to any recovery in the world\’s largest economy, which has officially been in recession for about a year.
Investors were also waiting anxiously to see whether US lawmakers will agree to a bailout of the Big Three carmakers.
Democrats said Sunday that a deal was imminent after a weekend of negotiations with the White House on a short-term loan package of about 15 billion dollars, but Republicans warned of a tough debate ahead.
A business-savvy "car czar" could be named to oversee taxpayer-funded loans to General Motors, Ford and Chrysler, which employ millions of US workers.
The leaders of Britain, France and the European Union were due to meet in London Monday for a mini-summit on the world financial crisis that will also involve around 50 leading businessmen and economists.
The 2008 winner of the Nobel economics prize, Paul Krugman, said lessons learned from the 1930s depression and from more recent economic crises could be the only thing warding off a new Great Depression.
"If we had not already experienced the Great Depression, I think we would be about to have another one," the Princeton University professor told reporters in Stockholm, where he will receive his Nobel prize this week.
"But the fact that we did have that Great Depression and have some economic analysis of how it happened, gives us some hope of avoiding a repeat," he said.