Asian stocks rallied on Thursday, propelled by the biggest surge in U.S. bank shares in 16 years and a sharp drop in oil prices, easing the worst fears about the global credit crisis spiralling out of control.
Wells Fargo & Co, the fifth-biggest U.S. bank, posted quarterly results well above expectations and raised its dividend by 10 percent, a glowing attraction at a time when investors are looking for stable income that helped to lift the entire sector.
Shares of high-profile Asian exporters like consumer electronics giant Samsung Electronics gained as lower energy prices comforted investors about the outlook for demand, while the stock of Japan's largest bank Mitsubishi UFJ Financial Group jumped 4 percent on hopes for the financial sector.
"Investors have been relieved by the earnings from Wells Fargo. The Tokyo market's gain is likely to be led by recently battered financials and exporters," said Masayoshi Yano, senior market analyst at Meiwa Securities in Tokyo.
Japan's Nikkei share average rose 1.3 percent, already set for the biggests daily rise in a month. Index heavyweights such as Sony and Canon were among the most powerful lifts, climbing more than 2 percent.
Outside of Japan, shares in the Asia-Pacific region were up 1.5 percent on the day after plumbing the lowest since March 2007 on Wednesday.
South Korea's KOSPI climbed 2.35 percent after on Wednesday touching the lowest intraday level since April 2007.
Crude prices were stable around $135 a barrel having fallen 6.9 percent so far this week on the view that demand from the United States, the top consumer nation, would continue to decline as a result of high energy costs.
But oil is still up 41 percent so far this year, confounding policymakers trying to bolster growth and shield their economies from turmoil in financial markets.
High energy prices were the biggest factor in speeding up U.S. consumer inflation to the quickest since Hurricane Katrina struck in September 2005.
The sharp fall in oil prices have helped to push up the U.S. dollar overnight, though some analysts believe the longer-term direction of the currency is still lower.
Though the financial sector was jolted higher on signs of resilience at some banks, fears that the U.S. government may have to take over the top mortgage finance companies, Fannie Mae and Freddie Mac, continue to cast a pall of uncertainty over markets.
"Looking beyond the rally in the dollar last night, we think the developments concerning Freddie Mac and Fannie Mae warrant the dollar trading in a lower trading range for now," said Ashley Davies, currency strategist with UBS in Singapore.
The euro was at $1.5835 nearly unchanged on the day and about two cents below an all-time high hit on Tuesday. Against the yen, the dollar was at 105.02 yen. (Reuters)
