Asian stocks climbed nearly four per cent today on renewed hopes the US car industry would be rescued, strengthening willingness to take risks and knocking the US dollar to a two-month low against the euro.
Investors have been funnelling capital back to emerging Asia for the last few weeks and word the White House was considering using some of $700 billion meant to rescue financial institutions for the struggling car manufacturers extended the trend.
European stock index futures were also pointing to opening gains of at least two per cent.
However, worsening US economic data, a rapidly growing fiscal deficit and the likelihood the Federal Reserve will cut interest rates again this week all combined to weaken the dollar.
Oil bounced back $1 to trade above $47 a barrel on signs that Opec members might make a deep supply cut to boost prices when they meet later this week.
The MSCI index of Asia-Pacific stocks outside Japan rose 3.7 per cent on the day and is up about seven per cent so far in December, trying to pull off its first monthly increase since April.
Japan and South Korea led the region in stock performance. The Nikkei share average rallied 5.2 per cent, with Honda Motor Corp stock rose 8.5 percent, one of the biggest lifts to the Nikkei.
South Korea's benchmark KOSPI share average was up 4.9 per cent.
The risk of further declines based on earnings downgrades has been clearly outweighed by the cheapness of stocks at the moment. Toyota Motor Co stock is up 9.1 per cent even after Japanese media reported the world's top carmaker is likely to further cut its earnings forecasts and report an operating loss of $1.1 billion in the October-March period.
Hong Kong's Hang Seng index rose 3.1 per cent, led by HSBC and China Mobile. China Construction Bank and Bank of China (Hong Kong) Ltd were the only stocks that fell.
The White House indicated last week it is open to using part of the bank bailout package for the three biggest car companies - Chrysler LLC, Ford Motor Co and General Motors Corp. A bill that would have provided $14 billion in loans for the firms failed in the Senate on Friday.
The yen was up slightly at 90.98 per dollar, having rallied to its strongest in 13 years on Friday at 88.10 after the U.S. auto bailout initially flopped.
The euro rose to highs around $1.3490 on electronic platform EBS, the highest in almost two months.
The rally in stocks sucked money out of the bond market, pushing up the yield on the benchmark 10-year US Treasury note, which moves in the opposite direction of the price, to 2.59 per cent from 2.58 per cent late in New York on Friday.
Reuters