Obama sees flickers of hope

March 23, 2009
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, WASHINGTON, Mar 23 – US President Barack Obama said he saw "flickers of hope," possibly the basis for faster-than-expected recovery, as stocks jumped Monday on news of an eagerly awaited new US bank rescue plan.

Backed by his president, under-fire Treasury Secretary Timothy Geithner said a new 500 billion dollar programme would help banks dispose of their toxic assets, a key step in restoring them to financial health.

In a Wall Street Journal opinion piece, Geithner said the programme could hit one trillion dollars, "a substantial share of real-estate related assets originated before the recession that are now clogging our financial system."

Geithner said the measure was needed because the US financial system as a whole was "still working against recovery" and "many banks, still burdened by bad lending decisions, are holding back on providing credit."

Stock markets in Asia and Europe posted solid gains on the news, extending an advance built on hopes that the worst global economic slump in decades may finally be touching bottom.

Fuller details of the plan, due to be announced later Monday, could provide further impetus if they point to a way out of the quagmire of bad debt for the banks, dealers said.

In Europe, London was up 1.58 percent, Paris added 1.49 percent and  Frankfurt gained 1.71 percent In Asia, Tokyo jumped 3.39 percent, nearing a two-month high, and Hong Kong soared 4.78 percent while Sydney rose 2.4 percent.

"Today\’s focus is squarely going to be back on the US Treasury with an announcement to tidy up the ongoing toxic debt issue amongst the banks being widely expected," CMC Markets dealer Matt Buckland said.

"This should prove to be good news … (the details) will likely take some time to disseminate which could in turn help extend the rally."

Others advised caution in light of past false dawns.

"The outlook … remains uncertain as the details of the plan may not be able to satisfy investors\’ hopes and they may take profit on the news," UOB Kay Hian director Steven Leung said in Hong Kong.

President Barack Obama meanwhile said he could see "flickers of hope" for the US economy and expressed cautious optimism for a quick recovery.

"Well, we\’re already starting to see flickers of hope out there," Obama told CBS\’s \’60 Minutes,\’ adding that a recovery could come faster-than-expected.

"Now there\’s a potential silver lining, which may be that things are so accelerated now, the modern economy is so intertwined and wired, that things happen really fast — for ill, but things may (also) recover faster than they have in the past," he said.
Another positive lead came after China said Monday it would continue to invest in US Treasury bonds, a vote of confidence after concerns were raised about the safety of such US-dollar denominated holdings.

"Investing in US Treasury bonds is an important element in China\’s investment strategy and we will continue this practice," Hu Xiaolian, deputy governor of the China\’s central bank, told reporters.

China has been the top holder of US Treasury bonds since September, when it overtook Japan for the first time with nearly 740 billion dollars worth, playing a key role in the management of US public finances.

Despite Monday\’s more positive tone, there was still bad news.

The global economic situation remains "extremely worrying and difficult," International Monetary Fund Managing Director Dominique Strauss-Kahn said.

"The situation remains extremely worrying and difficult. It is the first setback for the world economy in over 50 years," Strauss-Kahn said, referring to IMF forecasts for a contraction of 0.5-1.0 percent this year.

In Japan, the world\’s second largest economy stuck in its worst slump since World War II, business confidence slumped to its lowest level in five years.

"The Japanese economy is worsening rapidly and is in a severe situation," a finance ministry official said.

The government also reported that a fledgling recovery in land prices from the 1990s had ground to a halt, adding to fears that Japan is heading back into deflation.

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