World stocks rise on bank hopes, euro maintains gains

Asian shares rose on Tuesday and the euro held most of the previous session’s big gains on hopes that European leaders are finally taking action to protect the continent’s banks from its festering sovereign debt crisis.

World stocks clambered out of bear market territory on Monday after a pledge from German and French leaders to come up with a plan by the end of the month to tackle Greece’s confidence-sapping debt woes and recapitalise European banks.

“I think it is significant that Germany and France came together to show they will not allow big banks to collapse,” said Takashi Hiroki, chief strategist at Monex Securities in Tokyo. “Hopes that there won’t be an abandoned bank like Lehman will ease excessive worries in the market.”

Japan’s Nikkei share average rose 2 percent, partly catching up with gains elsewhere on Monday, when Tokyo was shut for a holiday, while MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.6 percent.

Asian investors were also watching Chinese markets, which open later, after a unit of the country’s sovereign wealth fund began buying more bank shares to support struggling stocks. Shanghai’s benchmark has lost nearly 17 percent this year amid growing concerns of a “hard landing” for the economy.

Wall Street stocks rose more than 3 percent on Monday and European shares gained nearly 2 percent.

MSCI’s All-Country World index now stands around 18 percent below its May high for the year after climbing past the 20 percent loss level — the rule-of-thumb definition of a bear market — on Monday.

The euro edged down a little to $1.3620 on Tuesday, after surging as much as 3 cents to a high just below $1.37 in the previous session. The single currency was steady against the yen at around 104.45.

Commodities also surged on Monday as money flowed back into riskier assets.

Oil was steady-to-slightly-lower on Tuesday, with US crude around $85.33 a barrel and Brent crude around $108.89. Reuters