updated 4/10/2009 11:03:02 AM ET 2009-04-10T15:03:02

Asian stocks finished mostly higher Friday in holiday-thinned trading, extending big gains logged in markets around the world the previous day as investors’ newfound confidence in the economy grows.

Key stock market indicators gained 0.5 percent in Japan, 1.5 percent in South Korea, 2.7 percent in Shanghai and 1.2 percent in Thailand. Russia’s RTS index rose 0.9 percent.

Trading was quiet as stock markets in the United States, Britain, Germany, France, Australia and New Zealand were closed for Good Friday. Exchanges in Hong Kong, India, Indonesia, Singapore and the Philippines were also closed. Oil markets were also closed.

Most markets reopen on Monday, but European markets are closed until Tuesday.

The gains in Asia appeared to be driven by the big advance Thursday in the United States where a major bank, Wells Fargo & Co., said it expects to report a big profit for the first quarter. That sparked a rally in U.S. financial stocks which have been beaten down in recent quarters by huge write-downs related to rising loan defaults and the recession.

U.S. investors viewed the Wells Fargo forecast as a sign that troubles in the country’s ailing financial industry may be nearing an end.

But that will likely be tested next week as a number of high-profile banks, including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., are set to report first-quarter earnings. The stability of the industry is of particular concern for investors who believe that an economic recovery hinges on healthy banks.

Global markets made big gains in March, and are continuing to show signs of strength. Increasingly better economic data, combined with government efforts around the world to end the global recession, have fueled hope that the economy may be turning a corner. Stocks usually start to recover about six to nine months before the economy.

However, many analysts contend that the earnings reports from U.S. companies pouring in over the next few weeks could upset the recent advance in stocks if they show more signs of pain in the economy.

In Japan, the Nikkei 225 stock average gained 48.05 points, or 0.5 percent, to 8,964.11 — its highest closing level since Jan. 7 — despite declines among Japanese banking stocks.

Japan’s mega lenders got pummeled after Sumitomo Mitsui Financial Group warned investors that it had a loss in the just-ended fiscal year. To shore up its capital position, the country’s No. 3 bank said it was moving to issue new shares.

Shares of Sumitomo, the smallest of Japan’s three mega banks, faced a glut of sell orders and trading in the stock was halted for much of the day before plunging 13.9 percent.

Its rivals also fared badly. Mizuho Financial Group Inc. shed 9.6 percent while Mitsubishi UFJ Financial Group, Japan’s biggest bank, lost 1 percent.

Video: Wells Fargo’s profit shocks market The Japanese banking performance contrasted sharply with Thursday’s showing by financials in the U.S., which surged after Wells Fargo said it expected to post first-quarter earnings of $3 billion, well above analyst forecasts. Wells Fargo had been a recipient of some $25 billion in funds as part of the government’s bank bailout plan.

“The performance was better than expectations so everyone is thinking the financial sector is getting better,” said Christian Jin, who helps oversee $1.2 billion in assets as head of global investment at CJ Asset Management in Seoul. “A lot of people were worried about next week’s earnings, but with the report investors are thinking there will be no problems with the financial companies.”

After trading closed, Japanese Prime Minister Taro Aso unveiled a new stimulus package, calling for 15 trillion yen ($150 billion) in government spending to lift the world’s second-largest economy from its painful recession.

Tokyo’s biggest winner of the day was Pioneer Corp., which skyrocketed 27 percent on news that it will form a joint venture with Sharp Corp. Other major exporters climbed as the dollar held above the key 100-yen level. Nissan Motor Co. advanced 4.9 percent and Sony Corp. added 4.2 percent.

South Korea’s Kospi climbed 19.69 points, or 1.5 percent, to 1,336.04. Shanghai’s main index rose 2.7 percent to 2,444.23. Markets in Taiwan and Malaysia also gained.

Thailand’s stock benchmark rose 1.2 percent despite anti-government protests causing gridlock in parts of Bangkok while another group of demonstrators converged on an Asian leaders summit in Pattaya, a beachside town about 140 kilometers (87 miles) southeast of the capital.

On Thursday in New York, the Dow Jones industrial average rose 246.27, or 3.1 percent, on the Wells Fargo forecast. Broader stock indicators also piled on big gains. The Standard & Poor’s 500 index rose 31.40, or 3.8 percent, to 856.56. The Nasdaq composite index rose 61.88, or 3.9 percent, to 1,652.54.

In currencies, the dollar fell to 100.42 yen from 100.58 yen. The euro was higher at $1.3135 from $1.3124.

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