French President Nicolas Sarkozy and German Chancellor Angela Merkel AFP PHOTO
HONG KONG – Asian markets surged for a fourth straight day on Tuesday as dealers followed a rally on Wall Street caused by a French and German promise to back up beleaguered eurozone banks.
Adding to the sense of optimism was a decision by France, Belgium and Luxembourg to bail out Dexia bank, the first lender to be dragged under by the European debt crisis.
Tokyo was 1.98 higher by the break, Hong Kong rose 4.13 percent at the open, Sydney added 0.79 percent, Seoul surged 2.24 percent and Shanghai was 2.43 percent higher.
Traders have been in a buying mood for several sessions as fears that a likely Greek default would be contagious eased slightly, thanks to top European figures saying everything possible would be done to protect other economies.
That culminated Sunday with German Chancellor Angela Merkel joining French President Nicolas Sarkozy in saying they would help recapitalise the region’s banks.
Despite the lack of any details on what they would do, the announcement gave investors confidence that leaders were coming together to overcome a crisis many fear could spark another global financial downturn.
Asian markets soared on the news on Monday, and regional investors added to that after watching Wall Street and Europe also post healthy gains.
On Wall Street, the Dow climbed 2.97 percent, the S&P 500 jumped 3.41 percent and the Nasdaq rocketed 3.50 percent.
And in Europe London’s FTSE 100 added 1.80 percent, the Frankfurt DAX rallied 3.02 percent and in Paris the CAC-40 climbed 2.13 percent.
But Cameron Peacock, IF Markets chief market analyst in Sydney, told Dow Jones Newswires: “The market probably needs to see the proverbial proof (on Europe fixing its problems) in the pudding before it gets too carried away.”
Also bolstering confidence was France, Belgium and Luxembourg’s decision to help Dexia, the second time in three years that the lender has needed a rescue.
The move suggests that European governments are willing to prevent the region’s banks from being swamped.
The euro eased a tad after surging on the Merkel-Sarkozy news in New York on Monday.
The euro bought $1.3633, from $1.3637 late Monday in New York, while it also fetched 104.60 yen, compared with 104.60.
It had been at $1.3477 and 103.43 in afternoon trade in Asia Monday.
The greenback traded at 76.65 yen Tuesday from 76.70 yen in New York.
The Shanghai market was boosted by China’s big four banks after sovereign wealth fund Central Huijin Investment bought stakes in each of them in a government move to shore up financial markets and boost confidence in the lenders.
In morning trade Industrial and Commercial Bank of China added 2.2 percent, Bank of China rose 2.8 percent, China Construction Bank was 3.6 percent higher and Agricultural Bank of China climbed 2.4 percent.
New York’s main contract, light sweet crude for delivery in November, was up 18 cents to $85.59 per barrel.
Brent North Sea crude for November delivery dipped 14 cents to $108.81.
By 0225 GMT gold was at $1,684.25 an ounce, up from $1,663.70 at 1100 GMT on Monday.