Asian stocks rally after Fed cut

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Asian stocks rally after Fed cut

By TOMOKO A. HOSAKA, Associated Press Writer 47 minutes ago, 19-3-2008

TOKYO - Asian stock markets opened sharply higher Wednesday as investors welcomed a hefty U.S. interest rate cut and a rally on Wall Street overnight.
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Sentiment was also lifted by better-than-expected earnings from major U.S. investment banks Goldman Sachs and Lehman Brothers, easing concerns about fallout from the global credit crisis.

Japan's benchmark Nikkei 225 index jumped 2.8 percent to 12,292.73 at the end of the morning trading session, while Hong Kong's Hang Seng index surged nearly 3 percent.

Australia's main index was up 3.7 percent and markets in South Korea, China and Singapore were also sharply higher.

In a bid to shore up the sagging U.S. economy and bring relief to the struggling financial sector, the Federal Reserve on Tuesday slashed its key interest rate by three-quarters of a percentage point to 2.25 percent, its lowest since December 2004.

While many investors were expecting the Fed to cut rates a full percentage point, they quickly overcame some initial disappointment, especially since a 0.75 point cut is still substantial. The Fed began lowering rates exactly six months ago, after the credit markets seized up due to soaring defaults in subprime mortgages.

The Dow Jones industrial average soared 420 points, or 3.51, to 12,392.66 on Tuesday. That was its biggest one-day point gain in more thgan five years.

Investors were also heartened by better-than-expected earnings from Goldman Sachs Group and Lehman Brothers Holdings, which came out just a day after markets worldwide were shocked by Monday's news that JP Morgan Chase had bought rival investment bank Bear Stearns for $2 per share, which amounts to less than $250 million. That sparked concerns about the full extent of the credit crisis.

The dollar also rose against several main Asian currencies Wednesday, trading just below the 100-yen level at 99.88 yen late Wednesday morning. It had fallen below 96 yen on Monday, its lowest in 12 1/2 years.

Japanese financial markets will be closed Thursday for a national holiday.