Asian stocks climb amid European developments
Asian stocks climbed Friday after Europe's move to backstop troubled banks and Britain's plan to pump more stimulus into its fading economy gave a boost to confidence.
After a week of wild gyrations stemming from Europe's debt crisis, investors in Asia reacted positively to news that the Bank of England will turn on its stimulus taps and that the European Central Bank will offer new short-terms to banks that are facing difficulties securing funding.
Hong Kong's Hang Seng index leaped 3.5 per cent to 17,778.34 after surging 5.7 per cent the day before while South Korea's Kospi index jumped 2.9 per cent to 1,760.31.
Japan's Nikkei index rose 1.4 per cent to 8,640.34 after the country's central bank said the economy is "picking up" and predicted an eventual return to a moderate recovery.
Benchmarks in Taiwan, Singapore, Australia and New Zealand also advanced. Markets in mainland China were closed for a weeklong holiday.
"We're seeing a lot of buying today basically because markets have bounced off their lows so a lot of people are covering their shorts ahead of the weekend" before stock prices increase further, said Andrew Sullivan, a sales trader at Piper Jaffray Asia Securities Ltd. in Hong Kong.
Short sellers borrow a stock to sell and "cover their shorts" when they buy it back at a lower price, pocketing the difference when it is returned to the lender.
"There was positive news out of the U.K., out of Europe on the banking side certainly and that spurred a run on the U.S. banks being positive as well," Sullivan said.
European and U.S. bank stocks gained after the ECB and Bank of England announcements on Thursday. The moves gave hope to global financial markets and were a sharp turnaround from the beginning of the week, when stocks tumbled on fears that European policymakers were acting slowly and indecisively to contain the debt crisis.
The ECB offered new unlimited emergency short-term loans to the Continent's battered banks, which have faced difficulties borrowing from each other because of worries about each other's financial stability.
The ECB will also buy up to €40 billion ($53 billion) in covered bonds, an important source of funding for banks. But it held interest rates steady, disappointing some economists who had hoped for a cut.
On the same day, the Bank of England said it would pump another £75 billion ($116 billion) into the country's stagnant economy, reviving an asset purchase program that injected £200 billion from March 2009 to January 2010. The bank's decision came earlier and was bigger than many economists had predicted.
A U.S. report later Friday on September employment will provide guidance on the state of the economic recovery. Investors are looking closely for any clues ahead of its release.
Piper Jaffray's Sullivan said that in a speech on Thursday U.S. President Barack Obama "criticized Europe for dithering over Greece and its banks."
"To some people that might indicate that jobs number is going to be worse than the market is expecting."
In currencies, the euro was marginally higher at $1.3430 from $1.3429 late Thursday. The dollar inched up to 76.62 yen from 76.61.
Oil prices rose, with benchmark crude for November delivery up 34 cents, or 0.4 per cent, to $82.95. The contract jumped $2.91, or 3.7 per cent, to finish at $82.59 per barrel in New York on Thursday.
Brent crude rose 27 cents, or 0.3 per cent, to $106.00 in London