MW: Stocks end up, but off highs, in volatile session
Automobile stocks drop in Tokyo, while banks tumble in Sydney
HONG KONG (MarketWatch) -- Asian markets rose sharply Wednesday after the U.S. Federal Reserve's steep interest rate cut, though they ended well below the day's peak amid worries about a bleak global economic outlook and concern over corporate earnings.
In a volatile Tokyo session, the Nikkei 225 Average climbed as much as 2% in early trading but reversed direction and slipped into the red, before ending 0.5% higher at 8,612.52. The broader Topix index rose 1.2% to 838.46.
South Korea's Kospi jumped 3% and then dropped 1.4% before ending 0.7% higher at 1,169.75 in choppy trading.
Referring to the recent strong performance of most Asian markets, Tim Rocks, Asia strategist at Macquarie Research, said investors will at some point have to address the fact that the U.S. economy is "very sick" and that earnings growth in Asia could remain weak.
"You may see an absence of bad news until we get to the reporting season in February-March. It's possible markets will go up until then and that they'll fall back pretty much close to their lows again during February and March. That'll be a better entry point for a more sustained rally," said Rocks.
Hong Kong and Australian shares also came off their highs, with the Hang Seng Index up 1.7% at 15,384.92, while the S&P/ASX 200 index gained 0.4% at 3,570.60.
China's Shanghai Composite rose 0.1% to 1,976.82, Taiwan's Taiex gained 0.7% to 4,648.02, Singapore's Straits Times Index advanced 0.8% to 1,796.26 and New Zealand's NZX 50 index was little changed at 2,695.93.
India's Sensitive Index, or Sensex, reversed early gains and slipped 0.2% to 9,954.91, finding resistance above the psychologically-important 10,000-point level.
Regional detail
Financial shares were mixed, with Japanese and South Korean banks rising after the U.S. central bank's Federal Open Market Committee established a target range for the federal funds rate of zero to 0.25%, effectively cutting its key rate for overnight lending to banks by between 0.75% and 1%. The Fed also promised new measures to stimulate spending. See full story.
"I really don't think [the Fed action] is a surprise at all, because most of the measures they've announced have been in place for some months. They just formalized the approach they've already adopted," Rocks said.
Mizuho Financial Group shares climbed 3.2% in Tokyo and KB Financial Group added 6.2% in Seoul.
But Australian lenders declined as Commonwealth Bank of Australia requested a trading halt on its shares, pending an announcement about a A$2 billion ($1.36 billion) share placement plan. A Reuters report said the bank has scrapped the share issue and relaunched it at a lower price. CBA separately wrote in a statement it had terminated a share placement agreement with Merrill Lynch International Australia "on the basis that Merrill Lynch didn't inform potential investors of the various disclosures made" by CBA a day earlier.
Shares of Australia & New Zealand Banking Group tumbled 4.6%, while Westpac Banking Corp. lost 4.7%.
In Hong Kong, property developers were broadly higher on hopes commercial banks may cut lending rates after the Hong Kong Monetary Authority slashed its key interest rate by one percentage point earlier Wednesday, in the wake of the Fed's rate move.
Shares of Sun Hung Kai Properties rose 3.4% and Henderson Land Development Co. surged 7.3%.
Shares of exporters were mixed in Tokyo, with overnight gains on Wall Street lifting some, while a strengthened yen weighed on others. Shares of Nikon Corp. ) advanced 1.7%, but Advantest Corp. fell 2.2%.
Shares of automobile companies declined on concerns about the impact of falling global sales. Honda Motor Co. lost 4.2% before it slashed its earnings forecast for the current financial year.
Nissan Motor Co. shed 4.1% before it announced plans to reduce production in Japan by 78,000 units from January. The company said it will also reduce headcount by 500 short-term employees during the first quarter of 2009.
The U.S. dollar dropped against most major currencies in the wake of the Fed's steep rate cut and recently bought 88.70 yen, compared with 90.09 yen in the previous session.
Among resource shares, BHP added 1% and Woodside Petroleum gained 4.1% in Sydney, while Cnooc climbed 6.7% in Hong Kong.
January crude-oil futures were up 55 cents at $44.15 a barrel in electronic trading, after dropping 91 cents to $43.60 a barrel on the New York Mercantile Exchange.
On Wall Street, the Dow Jones Industrial Average surged 4.2% to 8,924.14 on the Fed rate cut. The S&P 500 index rose 5.1% to 913.18, while the Nasdaq Composite advanced 5.4% to 1,589.89.
