HONG KONG, October 15, 2008 (STAR) World markets soared for a second day Tuesday, led by a record 14 percent jump in Tokyo, after Wall Street rallied from its worst week ever on optimism that government rescue efforts will heal the crippled global financial system.

Japan’s benchmark Nikkei 225 index surged 1,171.14 points, or 14.15 percent, to close at 9,447.57, its biggest single-day gain in history. That’s a stunning reversal after the index plunged 24 percent last week. Tokyo financial markets were playing catch-up to recent developments because they were closed Monday for a holiday.

European markets followed Asia higher in early trading, with benchmarks in Britain, Germany and France opening up more than 4 percent.

Hong Kong’s key index gained 3.2 percent, while South Korea’s market jumped over 6 percent. The Philippine market surged more than 7 percent (Story on B-1) and Indonesia’s market – shut half of last week due to dramatic declines – was up more than 6 percent.

Only China’s main market index fell – sliding 2.7 percent.

Late Monday in the US, government officials and industry executives said the Bush administration will use $250 billion of the $700 billion bailout program recently passed by Congress to buy into American banks. The government initially will buy stock of nine large banks, but the program is expected to be expanded to many others.

President George W. Bush planned to announce the details later Tuesday.

That followed signals that European governments were putting up nearly $2 trillion to safeguard their own banks.

“The governments are ensuring that no matter what happens they’re not going to allow another major institution to fail,” said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co., which manages about $300 billion in assets.

“What’s happened in the last 48 hours is an extremely positive development... You’re seeing a reversal of the panic selling, and we think a temporary bottom has been found.”

Tuesday’s advance came after the Dow Jones industrial average gained more than 11 percent — its biggest one-day gain since 1933 — in a huge overnight rally as traders reacted with relief to efforts by the US and Europe to inject capital into banks and get lending flowing again.

US stock futures were up, suggesting Wall Street would climb higher Tuesday. Dow futures advanced 51 points, or 0.5 percent, to 9,540. S&P 500 futures were up 10 points, or 1 percent, to 1,026.

In line with the global intervention, Asia-Pacific governments took more steps to fortify their own financial systems.

As part of the Japanese measures, authorities on Tuesday relaxed regulations on companies buying up their own shares, a change that will help prevent takeovers and allow companies to prevent a nose-dive in their own issues.

Japan also promised to continue to protect people’s insurance policies and savings accounts, and said it will consider capital injection into medium-size and small Japanese financial institutions.

Japanese megabank Mitsubishi UFJ Financial Group Inc. added more than 14 percent after completing a $9 billion deal for a 21 percent stake in US investment bank Morgan Stanley.

In Australia, the government announced a plan to inject $7.4 billion to strengthen the country’s economy, helping send the S&P/ASX200 index 3.7 percent higher. Hong Kong promised to guarantee all bank deposits until 2010.

Russia’s stock markets joined the upward surge Tuesday, prompting regulators to suspend trading on one of the two major exchanges. The MICEX, where most of Russia’s trading takes place, climbed 11.2 percent before trading was halted for an hour. The RTS climbed 6.4 percent.

Stocks across Asia have surged this week after going into a tailspin last week amid growing worries that the financial crisis would pull the global economy into recession.

While those concerns still linger, investors were encouraged that governments appeared to be taking steps to tackle one of the core problems – helping to revive bank-to-bank lending, which has almost ground to halt because of fears about repayment due to enormous losses from souring mortgage-linked debt.

Lending rates softened somewhat Tuesday in Asia but remained elevated despite the coordinated global interest rate reductions and massive liquidity boosts of late, a sign that banks were still skittish about making loans to one another.

On Tuesday, the Hong Kong interbank offered rate, known as Hibor, for three-month dollar loans dipped 0.02 to around 4.42 – still nearly double what it was in the days before Wall Street bank Lehman Brothers collapsed last month, analysts said. A similar rate in Singapore slid .13 to 4.66.

“Things are still definitely not back to normal,” said Teck-Kin Suan, an economist at United Overseas Bank in Singapore. “Obviously the banks are still reluctant to lend ... it’s going to take some time for these measures to take place.”

On Monday, the London interbank offered rate, or Libor, for three-month dollar loans fell 0.07 percent to 4.75 percent.

Oil continued to rise, with light sweet crude for November delivery gaining $2.54 to $83.73 a barrel in Asian trade on the New York Mercantile Exchange. The contract added $3.49 to settle at $81.19 overnight.

In currencies, the dollar was at 102.35 yen – up from below 100 yen last week –while the euro was little changed at $1.3644. – AP

Chief News Editor: Sol Jose Vanzi

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