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WORLD> Asia-Pacific
Asian markets gain ahead of Japan rate decision
(Agencies)
Updated: 2008-12-18 19:21

HONG KONG -- Asian stock markets gained modestly Thursday as expectations grew that Japan would soon cut interest rates to support its contracting economy and crude oil prices sank to 4 1/2-year lows.

Money traders watch monitor screens during the morning session in Tokyo, Thursday, Dec. 18, 2008. Asian stock markets gained modestly Thursday as expectations grew that Japan would soon cut interest rates to support its contracting economy. [Agencies]

Most markets were marked by slim, uneven trade after Wall Street dipped overnight as early enthusiasm about the Federal Reserve's historic rate cut gave way to concerns that a turnaround in the US economy was still far off.

In Tokyo, the Nikkei 225 stock average climbed 54.71 points, or 0.6 percent, to 8,667.23 after flitting in and out of negative territory in morning trading. Hong Kong's Hang Seng Index recovered near the end of the session to add 0.2 percent to 15,497.81.

Benchmarks in Australia, South Korea, Singapore and Chinese mainland also advanced.

The dollar recovered slightly from 13-year lows against the yen but continued to slide against the euro.

Asia's markets have shown surprising strength since rebounding from last month's sell-off, though some analysts were skeptical that the upswing would last.

"This is not the start of a bull market, it's still a bear market rally," said Francis Lun, general manager of Fulbright Securities Ltd. "The economy is still in the doldrums, and I think people are thinking the zero interest rate policy is due to a long recession ahead."

The US rate cut has raised expectations the Bank of Japan will follow suit and slash its key rate to nearly zero when it wraps up a two-day meeting Friday. Goldman Sachs predicts the bank will shave its overnight call rate target from the current 0.3 percent to 0.15 percent, while JP Morgan forecasts a cut to 0.1 percent.

Financials gained on the speculation, with Mizuho Financial Group Inc. jumping 8.1 percent and Sumitomo Mitsui Financial Group Inc. gaining 8.5 percent.

Meanwhile, Honda dropped 3.4 percent a day after Japan's No. 2 carmaker said it was slashing its annual profit forecast due to the global slowdown.

Oil prices, meanwhile, edged up from 4 1/2 lows as investor pessimism over global crude demand outweighed OPEC's largest-ever production cut. The January contract fell as low as $39.19, a level not seen since at least July 2004, before recovering some to $40.70 a barrel in Asian trade, up 64 cents from the New York close.

Energy firms took a beating on crumbling crude prices. Chinese upstream oil producer CNOOC Inc. and Australia's Woodside Petroleum both dived more than 6 percent.

In China, a new stimulus package unveiled Wednesday to boost the country's slumping real estate market lifted shares in property firms. China Overseas and China Resources rose more than 2 percent in Hong Kong trade.

Overnight in New York, the Dow Jones industrial average lost 99.80, or 1.12 percent, to 8,824.34, after falling as many as 146 points earlier in the session. The Standard & Poor's 500 index slipped 8.76, or 0.96 percent, to 904.4.

Futures pointed to a rebound Thursday on Wall Street. Dow futures were up 50 points, or 0.6 percent, to 8,850, while S&P futures were up 3 points, or 0.3 percent, to 905.5.

The yen leveled off after a dramatic surge against the dollar, as Japan warned of possible intervention in the foreign exchange market. The dollar, which hit a 13-year low Wednesday, traded at 87.89 yen, up from 87.21 earlier. The euro rose to $1.4455 from $1.4400.

Finance Minister Shoichi Nakagawa told reporters he would "implement appropriate measures" regarding the yen's gains, which erodes exporters' foreign income.

"For export manufacturers the acceleration of the strong yen is a negative factor," he said.

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