Japan's stocks surged a second day as speculation the Bank of Japan
will cut rates spurred the yen's steepest drop in three decades,
boosting earnings prospects for makers of cars and electronics.
Honda
Motor Co., which said the rising yen led to a plunge in quarterly
profit, jumped 18 percent, the most in at least 34 years, while Toyota
Motor Corp., now trading below book value, rose 10 percent. Panasonic
Corp., the largest maker of consumer electronics, climbed 4.6 percent
after second-quarter profit beat its estimate, while consumer lender
Promise Co. rose the most in eight years after lifting its profit
forecast by a quarter.
The Nikkei climbed 589.98, or 7.7 percent,
to close at 8,211.90 in Tokyo, building on yesterday's 6.4 percent
advance. The broader Topix index added 46.29, or 5.9 percent, to
830.32, with more than five stocks rising for each that slumped.
The
Bank of Japan may cut its benchmark rate by a quarter percentage point
to 0.25 percent, Nikkei English News said, and the Federal Reserve will
announce its decision on interest rates as early as today. Central
banks are trying to stem a global market rout that has wiped out $13
trillion in share values this month, threatening to drag the world
economy into a recession.
Industrial output will fall more than 2
percent this month and next, Japan's Trade Ministry said today, while
the Finance Ministry cut its economic assessment on all the nation's 11
regions for the first time since 1998.
European stocks
gained for a second day as falling credit costs spurred a rally in
financial shares, while higher commodity prices pushed up oil and
metals producers.
National benchmark indexes climbed all of
the 18 western European markets except for Germany. The U.K.'s FTSE 100
added 8.1 percent. France's CAC 40 increased 9.2 percent. Germany's DAX
lost 0.3 percent, dragged down by Volkswagen.
Daimler AG surged 21 percent after Merrill Lynch & Co. said the
carmaker's shares were ``oversold'' following a 45 percent slump this
month.
Royal
Bank of Scotland, the U.K.'s fourth-largest lender, climbed 13 percent
to 64 pence. Allianz, Europe's biggest insurer, rallied 26 percent to
60.85 euros. Axa, the region's second-largest insurer, jumped 18
percent to 14.15 euros.
The London interbank offered rate, or
Libor, that banks charge each other for three-month loans in dollars
fell 5 basis points to 3.42 percent, its 13th straight drop. The rate
is down 140 basis points since Oct. 10. The comparable euro rate fell 2
basis points to 4.83 percent, the 15th consecutive decline, and losing
lost 56 basis points since Oct. 8, BBA data showed.
Rio Tinto
Group, the third-biggest mining company, rose 19 percent to 2,677
pence. BHP Billiton Ltd., the world's largest, gained 14 percent to 960
pence.
Copper for delivery in three months climbed as much as 14
percent to $4,670 a metric ton, extending yesterday's 2.7 percent gain.
Volkswagen tumbled 45 percent to 517 euros after its biggest
shareholder, Porsche SE, said it will take steps to increase the supply
of stock after a so-called short-squeeze spurred a fourfold rally in
the past two days.
Porsche soared 37 percent to 63.05 euros.
Deutsche
Boerse AG, operator of the Frankfurt stock exchange, said late
yesterday it will reduce Volkswagen's weighting in the benchmark DAX
index to 10 percent after the stock's surge.
The stock
market settled with a 1.1% loss Wednesday after a late-session surge
made in the final hour following an FOMC rate cut was reversed in the
final minutes of trade after headlines hit the wires that raised
concerns regarding General Electric's (GE 19.20, -0.29) revenue in
2009. Meanwhile, commodities made the strongest gains on record as the
dollar got hammered.
Specifically, the S&P 500 was up 3.1%
with 10 minutes left in the session and then quickly sank to a 1.8%
loss before settling with a decline of 1.1%. Small- and mid-cap stocks
outperformed with gains of 1.7% and 1.8%, respectively.
The Federal
Open Market Committee cut the fed funds rate by 50 basis points to
1.00%. This marks the lowest level since June 2004. The discount rate
was reduced by 50 basis points to 1.25%. Both actions were unanimously
approved. The Fed said the pace of economic activity has "markedly"
slowed as consumer expenditures declined, while inflation pressures are
expected to moderate due to the drop in commodity prices and weaker
economic prospects.
The FOMC believes that over time this action,
along with the Fed's other measures, will help promote moderate
economic growth. The announcement did not give any surprises, and left
the possibility for further rate cuts.
Separately, the Fed
established temporary currency swap lines with the central banks of
Brazil, Mexico, South Korea and Singapore. The move is meant to improve
liquidity and complement the Fed's current swap lines with 10 other
central banks.
Seven of the 10 sectors posted a loss.
Consumer
staples stocks trailed the broader market even though Procter &
Gamble (PG 61.33, -1.90), Kraft (KFT 28.47, -0.41 ) and Kellogg (K
50.02, -0.66) all reported better-than-expected quarterly earnings
results.
The telecom (-3.3%) sector was a laggard after Qwest (Q
2.33, -0.27) reported worse-than-expected quarterly earnings and said
it was cutting 1,200 jobs, or 3% of its workforce.
The consumer
discretionary sector outperformed on a relative basis with a decline of
0.1%. Casino and gaming stocks soared 11.5% after MGM Mirage (MGM
13.75, +3.42) reported an earnings drop and outlook that was
better-than-feared.
Commodities rallied across the board in a
rebound trade that was compounded by a 2.7% drop in the dollar. Crude
oil prices spiked 9.8% to $68.90 per barrel, getting an added lift
after the government's weekly energy report showed a
smaller-than-expected increase in crude inventory levels.
As a result, the energy (+2.3%) and material (+2.7%) sectors posted the largest gain this session.
In
economic news, September durable goods orders rose 0.8%, better than
the expected decline of 1.1%. Excluding transportation, durable goods
orders fell 1.1%, which was better than the expected decline of 1.5%.
However, nondefensive capital goods excluding aircraft, which is a
proxy for business investment, fell 1.4%.