Japan stocks soared, sending the Nikkei 225 Stock Average to its sharpest three-day advance in at least 38 years, as a gain in commodity prices and a weaker yen boosted the profit prospects for resource companies and carmakers.
Mitsubishi
Corp. and Mitsui & Co., trading companies that get more than half
their profit from commodities, soared more than 12 percent. Mazda Motor
Corp., which exports 80 percent of its production, jumped 25 percent,
the most in at least three decades, after the yen weakened to 99.12
against the dollar. Mobile carrier Softbank Corp. surged by its limit
of 13 percent after saying it will generate positive cash flow from
this year.
The Nikkei 225 climbed 817.86, or 10 percent, to close at
9,029.76 in Tokyo, the fourth-biggest gain in its 59-year history. The
broader Topix index rose 69.05, or 8.3 percent, to 899.37. The Nikkei
had fallen 41 percent in the past six months, steeper than the Standard
& Poor's 500 Index's 33 percent slide and a 34 percent drop in
Europe's Dow Jones Stoxx 600 Index.
The Nikkei 225 posted a
three-day gain of 26 percent, the steepest since Nikkei Inc. took over
the benchmark from the Tokyo Stock Exchange in July 1970. Even so, the
measure is on track to record its worst month in that history, losing
19 percent. Six of the 10 biggest moves in the gauge in that period
occurred this month, including a record 14 percent jump on Oct. 14.
Inpex
Corp., Japan's biggest oil explorer, climbed 10 percent to 549,000 yen,
while closest rival Japan Petroleum Exploration Co. added 7.5 percent
to 4,040 yen.
Crude oil for December delivery climbed 4.3 percent to $70.38 a barrel, after having risen the most in a month yesterday
European stocks rallied for a third day as
central banks from Washington to Hong Kong cut interest rates and the
Federal Reserve provided $120 billion to South Korea, Singapore, Brazil
and Mexico to unlock lending in emerging markets.
BHP Billiton Ltd.
and Xstrata rose at least 5 percent as lower borrowing costs bolstered
prospects for the global economy. Deutsche Bank AG soared 18 percent
and Alcatel-Lucent SA jumped 20 percent and after the companies
reported better-than-expected earnings.
The Stoxx 600 increased
1.2 percent to 216.24, as almost four stocks gained for every one that
fell. The index is still down 41 percent in 2008, headed for the worst
year since records began in 1987.
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%.