Global equities get brief respite

London: World stocks were mostly higher on Tuesday ahead of a key US Federal Reserve interest rate decision following sharp declines in Europe and Asia the day before amid credit-crisis fears.

European stocks rose, with the UK's FTSE 100 rising 2.2 per cent, France's CAC-40 Index gaining 2.2 per cent and Germany's DAX Index rising 2.3 per cent.

In Asia, stocks rose in Japan, Hong Kong and South Korea. China's two stock indices, however, declined sharply.

The advances came after Wall Street eked out a gain of 0.18 per cent on Monday, its first session after the weekend announcement that JPMorgan Chase was acquiring troubled US investment bank Bear Stearns. That news had earlier caused markets in Asia and Europe to tumble on worries about the health of the US financial system.

"Once again the banking sector had the biggest sway on the (FTSE) index, positive sentiment and some bargain hunting means that they add 32 index points," said Nick Mitchell, a trader at CMC Markets in London.

Relief

In the US, stocks were poised to open higher yesterday as investors, relieved by better-than-expected results from Lehman Brothers and Goldman Sachs, also anticipated that the Fed wold cut rates by as much as one percentage point.

In Tokyo, stocks rallied to break a three-day losing streak, as bargain hunters injected some life back into markets battered the day before by a falling dollar.

The benchmark Nikkei 225 Stock Average rose 1.5 per cent to 11,964.2 after a 450-point drop Monday. South Korea's main stock benchmark rose 0.9 per cent, while Hong Kong's Hang Seng index gained 1.4 per cent.

The Federal Reserve was expected later last night to lower its key interest rate further to counter continued turmoil in US markets roiled by subprime fallout, economists say.

The federal funds rate, the interest that banks charge each other on overnight loans, currently stands at 3 per cent. It was at 4.25 per cent at the beginning of this year.

The dollar again fell against the yen and euro on Tuesday in Asia amid the speculation that the Fed was set to slash its key interest rate.