18 Oct 2008

Markets gain, but economy fears remain

10:51 pm on 18 October 2008

Shares in Asia and the Pacific rose on Friday after encouraging earnings signals from technology firms and a slowly improving tone in short-term money markets helped ease concerns about a global recession.

Asian stocks posted their first weekly gain in seven, with advances in the last trading day underpinned by a rally on Wall Street on Thursday that sent the Dow Jones industrial average up more than 4%.

Japan's Nikkei index closed 2.7% higher on Friday, clawing back some of the previous day's heavy losses. Singapore stocks rose 0.5%, while Shanghai's main index advanced 1%.

In New Zealand, the benchmark index was almost 1.6% higher.

But other indexes in the region fell. Stocks in South Korea and Taiwan dropped more than 2% each. Australian stocks lost 1%, India's benchmark index slipped 0.5%, while Hong Kong shares closed 4.4% down.

European shares jumped in early trade on Friday, as investors picked up battered banks, while energy shares were lifted by a rise in crude. The FTSEurofirst 300 index of top European shares was up 2.7%.

Oil prices rose nearly $US3 a barrel, helped by equity gains and growing expectations for an OPEC production cut following a tumble in crude on Thursday.

But jitters remain after a volatile week that saw global stock markets rally and slump on alternative days amid signals of a potentially deep economic slowdown worldwide.

There were encouraging signals on the earnings front. International Business Machines, the biggest technology services company, said on Thursday it expects to meet long-term profit forecasts, partly due to continued growth in emerging markets.

Meanwhile, US firms such as Internet search leader Google Inc and chip maker Advanced Micro Devices Inc posted results that beat expectations.

The earnings results helped take some of the sting off signals that the American economy is slowing. Data on Thursday showed industrial output posted its biggest drop since 1974 in September, while a regional factory index slumped and labour markets showed softness.

Bush to meet with European leaders

US President George Bush is to hold talks on Saturday with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso on the global financial crisis.

Mr Bush has already spoken to leaders from Italy, Germany and Britain this week in a bid to co-ordinate a global response to the economic turmoil.

Mr Sarkozy had earlier called for a meeting of heads of state from the Group of Seven richest nations. France currently holds the presidency of the Council of the European Union.

The announcement of the summit at Mr Bush's retreat at Camp David in Maryland followed a $US250 billion plan to purchase stakes in a number of US banks by the federal government.

The move followed similar steps taken by the United Kingdom and other European countries earlier in the week.