Stocks rebound in Asia on banks’ rescue hopes

Australian and South Korean shares bounced on Monday after policymakers around the world took increasingly bold steps to staunch the bleeding in financial markets, including guarantees on bank desposits and directly injecting capital into banks.

The euro climbed while U.S. stock futures were up 4 percent, pointing to a sharply higher open on Wall Street, after the U.S. government said it would take stakes in banks and European leaders hatched a plan that included buying debt that banks issue, both aimed at freeing the flow of precious credit.

Global equity markets were gutted last week, and investors were even liquidating positions in safe havens like government bonds for cash, on dwindling hope that anything could be done to keep the global economy from sliding into recession.

Japan's stock market plunged 24 percent last week, twice its losses in the week of the 1987 crash, while U.S. stocks dropped 18 percent, the biggest weekly decline ever.

Japan's markets were closed for a holiday on Monday.

"The market was looking oversold so it was ripe for a bounce, it just needed a bit of good news," said David Cassidy, chief equities strategist at UBS.

Australia's benchmark S&P/ASX 200 index rose 4.9 percent, rebounding after a 16 percent decline last week, on a blanket guarantee of all bank deposits from the Australian government.

South Korea's KOSPI rose 2.2 percent, after closing on Friday at the lowest since July 2006.

The euro rose 1.2 percent from late U.S. trade to $1.3573 recovering from a 1-½ year low of $1.3258 struck on Friday.

The single currency jumped 1.4 percent to 136.92 yen up from a 3-year low of 132.15 also hit on Friday.

"Bank recapitalisation is core to the problem in interbank lending. Without it banks have to shrink balance sheets to restore capital adequacy ratios and remain frightened to lend due to counterparty risk," said Ashley Davies, currency strategist with UBS in Singapore.

"As such, the developments at the weekend fundamentally should help to improve risk appetite," Davies said in a note.