Japanese benchmark leads world stocks higher

HONG KONG - Japanese stocks rocketed Monday, leading a global market rally after dismal growth data raised hopes of extra stimulus for the world's third-biggest economy.

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Chinese shares dropped on their first day of trading after a weeklong holiday that coincided with a sharp sell-off in global markets.

Japan's benchmark Nikkei 225 soared 7.2 per cent to close at 16,022.58, rebounding from last week's slump to post its second biggest one-day gain in three years.

Stocks rallied after government data showed Japan's economy shrank 1.4 per cent on an annualized basis last quarter because of weak consumer demand and slower exports. It's a setback for Prime Minister Shinzo Abe's economic revival program, which aims to stoke inflation through massive monetary easing. However, the latest report also gives the government more reason to open the stimulus taps wider to restore growth, economists said.

"Together with the recent slump in the Nikkei and the appreciation of the yen, the case for additional easing remains compelling," said Marcel Thieliant of Capital Economics. He predicted the Bank of Japan will step up bond purchases and push interest rates that are already in negative territory even lower.

Investor sentiment was also bolstered by comments from China's central bank chief playing down the likelihood of a one-off devaluation of the yuan.

People's Bank of China Governor Zhou Xiaochuan signalled in a Caixin magazine interview published over the weekend that there was no basis for further depreciation of China's currency, providing relief for the country's exporting neighbours worried that a weakening yuan would hurt their competitiveness.

Global stock benchmarks followed Japan's lead. European shares opened sharply higher. France's CAC 40 advanced 3.1 per cent to 4,119.57 and Germany's DAX added 2.7 per cent to 9,210.14. Britain's FTSE 100 rose 2 per cent to 5,819.92.

U.S. stocks were poised for a strong open. Dow futures gained 1.2 per cent to 16,102.00. Broader S&P 500 futures increased 1.2 per cent to 1,880.40.

In Asia, South Korea's Kospi climbed 1.5 per cent to 1,862.20 and Hong Kong's Hang Seng was up 3.3 per cent to 18,918.14. Australia's S&P/ASX 200 rose 1.6 per cent to 4,843.50. Taiwan's benchmark was flat while markets in Southeast Asia gained.

The Shanghai Composite Index in mainland China, though, lost 0.6 per cent to finish at 2,746.20 after reopening following the Lunar New Year holiday.

Chinese shares were also weighed down by the latest monthly trade figures. Exports fell 11 per cent while imports slid by nearly a fifth, according to customs data, highlighting persistent weakness in the world's second biggest economy.

Economists, however, were reserving final analysis until figures for February are out because the timing of the Lunar New Year holiday distorts China's economic data at the beginning of the year.

In energy trading, benchmark U.S. crude oil futures lost 30 cents to $29.12 a barrel in electronic trading on the New York Mercantile Exchange. The contract climbed $3.23, or 12.3 per cent, on Friday to settle at $29.44 a barrel. Brent crude, a benchmark for international oils, fell 38 cents to $32.98 a barrel in London.

In currencies, the dollar strengthened to 113.78 yen from 113.22 yen on Friday. The euro weakened to $1.1194 from $1.1257.


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