U.S. Fed Cuts Prime Interest Rate; Asian Markets Rise

YURI KAGEYAMA writes:

TOKYO - Asian stock indexes rose sharply Wednesday, rebounding from steep losses in the previous two days after a surprise interest rate cut by the U.S. Federal Reserve.

Japan's benchmark Nikkei 225 index gained 423.82 points, or 3.37 percent, to 12,996.87 points on the Tokyo Stock Exchange in early trading. It had fallen 5.7 percent Tuesday — its biggest percentage drop in nearly 10 years — on fears of a recession in the U.S.

The Korea Composite Stock Price Index rose as much as 3.1 percent in the opening minutes of trading. The Kospi slightly pared gains to trade up 2.7 percent at 1,652.39 about 30 minutes into the session. The Kospi fell 4.4 percent Tuesday and 3.0 percent Monday.

European stocks fell sharply at their opening Tuesday, then rose in volatile trading ahead of the Fed's decision to cut its key rate to 3.5 percent from 4.25 percent, and rose even more afterward. The U.K.'s FTSE 100 finished up 2.9 percent at 5,740.10, while France's CAC 40 gained 2.1 percent to 4,842.54. In Germany, the DAX ended barely down, off 0.3 percent at 6,769.47, as utilities RWE and E.On fell but financials such as Deutsche Bank rose.

The surprise Fed move was aimed at fears that trouble in financial markets from the U.S. subprime crisis was spreading to the broader economy. Interest rate cuts tend to boost stocks. The Canadian central bank quickly followed, lowering its key rate by a quarter of a percent to 4 percent.