NEW YORK (MarketWatch) -- Stocks in emerging markets extended their rally for a second session Tuesday, with Russia, the Czech Republic and Argentina leading the gains, as investors continued to take heart from the efforts of governments around the world to stem the financial crisis.
Equities in Asia, Europe and the Middle East jumped Tuesday, adding to their strong gains from the previous session. The MSCI Emerging Markets index rose 7.4% on Monday.
In Russia, the Micex stock index soared 13%, forcing the suspension of trading for an hour on Tuesday morning local time. At Moscow's other exchange, the RTS stock index rallied 10%, with oil and gas shares leading the gains. In the Czech Republic, the PX index soared 11%.
In the debt markets, risk spreads have contracted, with the EMBI+ index falling 43 basis points to 609 basis points, according to data from RBC Capital Markets.
"Global equity markets are continuing to rally in response to policy makers' aggressive and ongoing steps to address the financial market crisis," said strategists at Brown Brothers Harriman in a research note.
However, they cautioned that "markets will eventually be tempered by the realization that despite the rescue efforts, the global economy is still likely to move into recession."
In Latin America, Argentina's Merval stock index soared 13% Tuesday after the local market stayed closed in the previous session for a holiday.
Elsewhere in the region, Brazilian and Mexican shares posted gains, but followed closely volatile trading in the U.S. Brazil's Bovespa was last up 2.3%, Mexico's IPC index gained 1% and Chile's IPSA index surged 5%.
On Wall Street, the Dow Jones Industrial Average was last up 50 points, but the Nasdaq Composite Index fell 1.4%. See Market Snapshot.
U.S. Treasury Secretary Henry Paulson laid out an unprecedented plan Tuesday to spend $250 billion to buy temporary ownership stakes in major U.S. banks in an effort to recapitalize the financial sector. Read more.
In Asia overnight, most markets rallied, with South Korea's Kospi index rising 6% and Thailand's SET index gaining 5%. Bucking the trend was China, where the Shanghai Composite index fell 3%.
In the Middle East, Saudi Arabia's TASI stock index rallied 7% and the Dubai Financial Market surged 11%. In South Africa, the All Share stock index rose 5.4%.
In New York trading, the iShares MSCI Emerging Markets Fund , which tracks the performance of the MSCI Emerging Markets index, fell 4%. On Monday, the fund rallied 23%.
