Global Markets Rally on Proposed $700B U.S. Bailout

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Asian markets rose Monday after the U.S. government proposed a $700 billion plan to solve the world financial crisis by rescuing banks from billions of dollars in risky mortgage debt.

In Japan, the Nikkei 225 index climbed 1.4 percent to close at 12,090.59 points, while Hong Kong's Hang Seng index rose 1.2 percent.

In China, the Shanghai Composite Index soared 7.8 percent on hopes of a turnaround after government steps to stabilize the country's beaten down shares.

Markets in Australia and Taiwan advanced strongly after regulators in both countries issued curbs on short selling, following similar moves in the U.S, Britain and other countries. The practice, which bets on a stock's decline, has been partly blamed for driving down share prices.

Global markets had rallied Friday on news Washington was likely to announce a bailout plan, calming investors worried that losses from bad bets on mortgages could bring about the collapse of more companies, straining an already weakened financial system and global economy.

As a rough outline of the plan took shape over the weekend, the Bush administration continued to lobby lawmakers Sunday for authority to use $700 billion to buy up a mountain of bad debt at the heart of the crisis.

While the proposed bailout lifted sentiment for the time being, there were still a number of uncertainties about the plan and the general health of financial firms that could further unsettle markets in the coming days, an analyst said.

"This should stem the bleeding, but the patient is still very fragile," said Thomas Lam, a senior economist at the United Overseas Bank in Singapore. "The list of uncertainties is pretty long.

Asian financial stocks, battered in recent weeks, were among the leaders.

Japanese banking giant Mitsubishi UFJ Financial Group Inc. shot up more than 5.2 percent, while leading Australian firm Macquarie Group Ltd. climbed 5.3 percent. In Hong Kong, Industrial & Commercial Bank of China, the country's biggest, was up 2.4 percent.

In mainland China, share prices surge on strong buying of financial shares after the government announced plans to buy shares in major state-owned banks and other measures.

After watching share prices slide for almost a year, the government moved to support the stock market last week in response to the global financial crisis triggered by problems with bad debt in the U.S.

Comments by Premier Wen Jiabao over the weekend urging support for the financial system and market stability also boosted buying sentiment, analysts said.

"According to our analysis, this could be a turning point for the market, not just a brief rebound," said Zhang Xiuqi, a strategist for Guotai Junan Securities in Shanghai. "Market sentiment is finally recovering."

The Shanghai benchmark still is down 57 percent for the year.

Large-capitalized financial shares, airlines and gold miners were among the biggest gainers.

Several major banks jumped by the 10 percent daily limit, including ICBC, Bank of China and Construction Bank of China. PetroChina, the index's heaviest-weighted share, also surged 10 percent.

Elsewhere, Australia's &P/ASX 200 index jumped 4.5 percent and Taiwan's benchmark rose 2.3 percent.

In Russia, stocks inched up following big gains for all indexes last week, with the U.S. dollar-denominated RTS adding 1.6 percent.

The advances came after an another extraordinary rally on Wall Street on Friday. The Dow Jones industrials soared about 370 points, or 3.35 percent, to 11,388.44, giving the index a gain of about 780 points over two days.

U.S. stock index futures were down, though, suggesting Wall Street may open lower. The S&P 500 futures index was down 8.3 points, or 0.7 percent, to 1,237.2.

Light, sweet crude rose 0.94 cents to US$105.49 a barrel in Asian trading on the New York Mercantile Exchange. The contract soared $6.67 Friday.

In currencies, the dollar fell to 106.41 yen, while the euro rose to $1.4507.