World stock markets surge on China package, Wall Street rally

10 Nov 2008, 1759 hrs IST, AGENCIES

Wall St rose on Monday, boosted by China's $586 bn package

LONDON: European and Asian stock markets soared on Monday, lifted by a
multi-billion-dollar economic stimulus package announced by China and a pre-weekend
rally on Wall Street, traders said. Shanghai closed up 7.27 per cent after the Chinese government announced at the weekend plans to spend four trillion yuan (586 billion dollars) on projects by the end of 2010.

The Tokyo rocketed to close 5.81-per cent higher, Hong Kong gained 3.5 per cent and Sydney won 1.4 per cent.

In morning trading in Europe, London rallied 3.45 per cent, Paris jumped 3.73 per cent and Frankfurt climbed 3.76 per cent, with mining groups leading the way on hopes that China's would significantly increase buying of raw materials, traders said.

"A solid finish on Wall Street last week and the announcement of a stimulus package to sustain the Chinese economy have both combined to shore up stock markets as the new week's trading gets underway," said CMC Markets dealer Matt Buckland.

US stocks had rallied on Friday after two days of steep losses on recession fears, despite grim data showing October unemployment spiked to a 14-year high and hefty quarterly loss from General Motors and Ford. Wall Street reopens at 1430 GMT.

On Friday, the Dow Jones Industrial Average leapt 2.85 per cent, the tech-heavy Nasdaq rose 2.41 per cent and the broad Standard & Poor's 500 index gained 2.86 per cent.

However Gulf stock markets mainly dropped for a second day running on Monday as the rally elsewhere failed to offset anxieties about the regional economy.

The Saudi and Omani markets rose only slightly, while the other five bourses dipped as investors appeared to take the view that the global crisis may have a deeper impact on the oil-rich Gulf states than initially thought.

"It appears that news which emerged in the past few days have not been well-received by investors. They are afraid the impact on the Gulf could be deeper," said Saudi economist Abdulwahab Abu-Dahesh.

"When oil prices slide this fast, investors become worried that the future may not look so promising," Abu-Dahesh said.

Oil prices on Monday rose to 63 dollars
a barrel, but the level remained massively below record highs of above 147 dollars reached in July.
China meanwhile unveiled a multi-trillion yuan economic stimulus plan on Sunday aimed at boosting domestic consumer demand in the face of flagging exports, as foreign markets contract in the global financial crisis
.

The measures were approved at a cabinet meeting chaired by Premier Wen Jiabao on Wednesday, state media said, and would increase spending on infrastructure and a range of other sectors amid slowing domestic growth.

"Given the magnitude of the plan, this will likely have a significant impact in buffering the current (Chinese) deceleration," said Calyon analyst Sebastien Barbe.

"However, let's keep in mind that the global shock is quite strong and that the package is unlikely to reverse the Chinese economic deceleration -- it will only slow its pace."

Economic growth in the country eased to 9 per cent in the third quarter of this year, the lowest in around five years, partly owing to slowing exports.