Asian markets up on Central Banks' move to help lending

Traders have been seeing some of the most volatile trading in years. Asian stocks have gained after a group of the world's biggest central banks unveiled plans to support the global financial system.

The US Federal Reserve, European Central Bank, and the central banks of the UK, Canada, Japan and Switzerland are trying to improve lending.

Japan's Nikkei 225 index rose 2.2 percent, South Korea's Kospi gained 3.9 percent and Australia's ASX 200 added 2.5 percent.

Earlier on Wednesday, US and European markets had jumped on the news.

Wall Street's Dow Jones index saw its biggest gain since March 2009, rising 4.2 percent. In Europe, Germany's Dax index closed 5 percent higher, while France's Cac 40 jumped 4.2 percent and the UK's FTSE 100 rose 3 percent.

"We are clearly seeing some very big stresses in the global banking system, and they wanted to do a pre-emptive strike," said Boris Schlossberg of GFT.

"The fact that this was a coordinated move took the market by surprise and lifted all risk trades," he added.

The move by the Central Banks is aimed at making it easier and cheaper for banks to buy US dollars.

This in turn should help make it easier for businesses and households to get access to finance.

As well as cheaper US dollars, the Central Banks will also provide easier access for lenders to other major currencies as and when they need it, beginning Monday, December 5.

In previous months, Central Banks and policy-makers have been criticised for not doing enough to reassure investors in what some observers are calling the most difficult economic climate in decades.

A key worry has been that the eurozone's debt crisis will become more severe and start affecting the wider global economy in a more profound and long-lasting manner. Analysts said that the move by the Central Banks was an indication that the policy-makers were trying to find a solution to the problems.

"You don't have to fix everything, you have to be on a path towards fixing things," said Tobias Levkovich of Citigroup in New York. "Markets will reward you for the efforts you are making as long as you are moving in the right direction.

"It's the carrot and the stick; you get rewarded when you do the right thing, and you get punished when you do the wrong thing."

Despite the gains in global stock markets and the optimism surrounding the Central Banks' move, analysts said the policy-makers still need to address the core issues and find a long-term sustainable solution to the eurozone debt crisis.

"This just means they expanded emergency measures," said Soichiro Monji of Daiwa SB Investments in Tokyo.

"The more important point is whether Europe is going to have a bigger bailout fund, and that's still up in the air."

BBC