Asian Markets Up, European Markets Fall

TOKYO - Most Asian markets rebounded Wednesday, reversing their recent gut-wrenching plunge as investors welcomed a hefty, surprise interest rate cut by the U.S. Federal Reserve to shore up the sagging American economy.

But European markets were lower at midday, and early indicators suggested prices would fall on Wall Street when the market opens.

Analysts said the market turmoil would linger for some time because the Fed's emergency action was seen by some as a sign American authorities view the U.S. credit crunch as a very serious problem.

"The Fed's action provided a very positive surprise," said Tsuyoshi Segawa, strategist at Shinko Securities Co. in Tokyo. "But people are also starting to think that things may be so bad they needed to act."

In Europe, where investors had a chance to cheer the Fed's cut Tuesday, the U.K.'s FTSE 100 was down 1 percent, while France's CAC 40 slid 1.4 percent and Germany's DAX was down 1.8 percent.

U.S. stock index futures showed that Wall Street was poised to fall Wednesday. Dow Jones industrial average futures fell 157, or 1.31 percent, to 11,794. Futures for the broader Standard & Poor's 500 index fell 18.90, or 1.44 percent, to 1,290.40, and the Nasdaq composite index fell 32.00, or 1.78 percent, to 1769.00.

Earlier in Hong Kong, the Hang Seng index surged 10.7 percent - its biggest gain 10 years - to 24,090.17, regaining much of the 13.7 percent it had shed over the previous two days.

Japan's Nikkei 225 index rose 2 percent to close at 12,829.06 after tumbling 9.3 percent the previous two days, while India's Sensex climbed 5.2 percent, recapturing nearly half its 12 percent losses from Monday and Tuesday.

In Shanghai, China's benchmark index, which sank 12 percent earlier this week, bounced back 3.1 percent, and Australia's market rebounded 4.4 percent, snapping a 12-day losing streak.

Fears of a U.S. recession, which would likely erode demand for Asian exports, has battered the region's markets since the start of the year.

The sell-offs accelerated Monday and Tuesday amid skepticism that a stimulus package announced by U.S. President George W. Bush on Friday would prevent the economy from contracting.

Jolted by worries of a global recession, the Fed on Tuesday slashed its federal funds rate three-quarters of a percentage point to 3.5 percent, the biggest reduction in this target rate for overnight loans on records going back to 1990. It also was the first time the Fed has changed rates between meetings since 2001.

On Wall Street Tuesday, the Dow Jones industrial average plunged more than 450 points initially but recouped most of its losses as the day progressed to close at 11,971.19, down 128.11 points, or 1.1 percent.

Investors in Asia were already factoring in another U.S. rate cut of as much a half-point when the Fed holds its regular meeting on Jan. 29-30, traders said. But markets could slide back if Wall Street continues to decline in coming sessions, they warned.

In Hong Kong, where the benchmark index had plunged 22 percent since the start of the year through Tuesday, investors took heart from the U.S. rate cut and snapped up stocks that had fallen to attractive levels.

Francis Lun, a general manager at Fulbright Securities, estimated that the Hong Kong market had been oversold by about 15 percent.

"It's time to recover, but investors still need to be cautious because the fluctuation now is too big," he said.

Asian-based companies welcomed the Fed's move, too.

"Anything that helps consumer sentiment is good for our business," said Bruce Rockowitz, president of Li & Fung, a Hong Kong-based exporter that sources products for major brands and retailers worldwide, including Wal-Mart Stores Inc.

"From a psychological effect, it's given people in the U.S. at least comfort that the government will do whatever they can to solve this crisis," he said.

Still, analysts warned that lower interest rates won't fix bad credit problems - and usually take several months to have an effect on an economy.

"We consider the Fed's rate cut still insufficient for the global financial markets to completely recover and help the Japanese stocks to fully rebound," Credit Suisse chief strategist Shinichi Ichikawa said.