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Asia markets climb after historic U.S. rate cut

Asian stocks markets climbed Wednesday after the U.S. Federal Reserve slashed its key interest rate to historic lows in an effort to pull the world's largest economy out of recession.
Japan Markets
A man walks past an electric market board in Tokyo, Japan, on Wednesday.Katsumi Kasahara / AP
/ Source: The Associated Press

Asian stocks markets climbed Wednesday after the U.S. Federal Reserve slashed its key interest rate to historic lows in an effort to pull the world's largest economy out of recession.

But enthusiasm was tempered by a mix of lingering worries about the U.S. economy and a weakening dollar — which could add to the woes of Asia's exporters.

Asian bourses opened higher after the U.S. central bank announced a steeper-than-expected 0.75 percentage point cut to its target rate for overnight loans between banks to a range of zero to 0.25 percent. The Fed also promised to use "all available tools" to heal the U.S. economy.

The central bank's bold actions surprised Wall Street — most analysts expected a 0.5 percentage point cut — and raised hopes of lower interest rates and cheaper money across Asia. Hong Kong's central bank slashed rates as a result, and speculation mounted of further easing from the Bank of Japan.

"Every central bank is pumping loads of liquidity into the markets and this is very positive for the markets," said John Mar, co-head of sales trading, Daiwa Securities SMBC Co. in Hong Kong.

In Tokyo, the Nikkei 225 stock average rose 44.50 points, or 0.5 percent, to 8,612.52 after initially rising 1.1 percent. Hong Kong's Hang Seng Index rose 1.5 percent to 15,361.58.

South Korea's Kospi added 0.7 percent to 1,169.75, while benchmarks in mainland China, Singapore, Thailand and Australia also gained.

'Less confidence' in Asia
Trade was far more cautious than in the U.S., where markets soared on the Fed's move. The Dow rose 359.61, or 4.2 percent, to 8,924.14 and the broader Standard & Poor's 500 index advanced 44.61, or 5.1 percent, to 913.18.

Analysts said the Fed's indications that it would do whatever is necessary to help bring an end to the longest economic contraction in a quarter-century underscored just how deep America's recession is.

"Investors in Asia have less confidence than their American counterparts in the Fed's ability to engineer an economic recovery," said Dariusz Kowalczyk, chief investment strategist for CFC Seymour in Hong Kong.

Tokyo's gains were limited by the souring dollar and worries about Honda, whose shares slid 4.2 percent.

Auto woes
Japan's No. 2 automaker said late in the day it was slashing its profit forecast for the fiscal year and cutting managers' pay cut amid a global downturn in the auto industry. Nissan Motor Co. fell 4.1 percent after announcing plans to scale back production by a further 78,000 vehicles and cut 500 temporary workers.

Also weighing on the markets, analysts said, was a modest drop in Wall Street futures, suggesting Tuesday's rally would quickly fizzle. Dow futures were down 62 points, or 0.7 percent, at 8,852 and S&P500 futures were off 7.8 points, or 0.9 percent, at 905.

Hong Kong's de facto central bank followed the Fed's move by cutting its base rate by a full percentage point to 0.5 percent. Because the territory's currency is pegged to the dollar, the Hong Kong Monetary Authority's actions usually follow the Fed's.

In currencies, the dollar traded at 88.78 yen, down from 88.91. The euro strengthened further to 1.4061.

Oil prices rose, with light, sweet crude for January delivery up $1.07 to $44.67 a barrel in Asian trade. The contract fell 91 cents to settle at $43.60 a barrel overnight.