Global stocks rise on China stimulus
Investors cheer Beijing's package, hoping it will help world economy stave off deep recession. But rally fails to extend to U.S. markets.
LONDON (CNNMoney.com) -- Global stock markets rallied Monday after China unveiled a $586 billion stimulus package that investors hoped would help the world economy stave off a deep recession.
But stock prices in the United States turned lower in afternoon trading as enthusiasm over China's plan faded. The Dow Jones industrial average was down 0.6% with about two hours left in the session.
European stocks jumped out of the gate but pared gains later in the day. Britain's FTSE-100 gained 0.4%. The CAC-40 in France advanced 1% and Germany's DAX closed 1.75% higher.
China's benchmark Shanghai Composite soared 7.3%, leading gains in Asia. Japan's Nikkei 225 rallied 5.8% and Hong Kong's Hang Seng index rose 3.5%.
China is the latest nation to launch a stimulus program in a bid to jump start economic growth. The U.S. pushed through a $168 billion package earlier this year and momentum is growing for lawmakers to pass a second plan.
The Chinese stimulus package includes loosening of credit restrictions, tax cuts and a massive infrastructure spending program, according to China's Xinhua news agency.
The money will be spent over the next two years to finance several areas, including low-income housing, technological innovation and rebuilding from several disasters -- namely the May 12 earthquake in Sichuan province that killed nearly 70,000 people.
The plan was approved Sunday by the State Council.
Oil prices climbed on the news as traders bet the program would help bolster demand for crude. U.S. crude for December delivery added $2.42 to $63.46 a barrel in electronic trading on the New York Mercantile Exchange.
The growth in China's economy slowed for the first nine months of 2008 compared to the same period last year, officials reported in late October, but still increased by nearly 10%.
The gains in European and Asian markets come on the heels of a solid session on Wall Street. U.S. stocks closed Friday on a positive note, with the major indexes all gaining 2 to 3% after two days of selloffs.
But investors are on edge, especially as they await the fate of Detroit's struggling automakers. General Motors (GM, Fortune 500), Chrysler and Ford (F, Fortune 500) met with Congressional leaders last week, seeking financial assistance.
All eyes are also on insurance giant American International Group (AIG, Fortune 500), which is due to release its latest quarterly results. The company may also announce a revised bailout deal from the federal government, according to the Wall Street Journal.
In currency markets, the dollar fell against the euro and rose versus the yen.