Shares On The Charge Around The Globe

Sydney Morning Herald

Wednesday November 26, 2008

Colin Kruger and agencies

Australian shares posted their biggest gains in more than 11 years yesterday on the back of the massive bail-out of troubled United States bank Citigroup and signs that the US Congress is preparing a fiscal stimulus package expected to top $US500 billion ($780 billion).

The ASX 200 index climbed for a third successive day, gaining 198.30 points, or 5.8 per cent, to 3,623.40. It was the sharemarket's biggest gain since October 1997, with resource and financial stocks leading the charge.

The domestic market followed the lead of Wall Street - and a record rise by British equity markets - on news of the Citigroup rescue. The Dow Jones Industrial Average gained 396.97 points, or 4.93 per cent, to close at 8443.39 while the S&P 500 index rose 51.78 points, or 6.4 per cent, to 851.81.

Asian markets also followed the lead with Japan's Nikkei average climbing 5.2 per cent, its biggest one-day rise in two weeks, though further gains were limited as the yen's advance against the dollar weighed on exporters such as Sony .

In what may prove to be just as important as the Citigroup bail-out, signs emerged of a more coherent response to the crisis as well as a willingness for the US President-elect, Barack Obama, to fill the leadership vacuum.

With the official announcement of his team of economic advisers on Monday night (US time) Mr Obama said the team would start work "today".

"The news this past week, including this morning's news about Citigroup, has made it even more clear that we are facing an economic crisis of historic proportions," Mr Obama said. "If we do not act swiftly and boldly, most experts now believe that we could lose millions of jobs next year."

News also emerged of a more coherent rescue plan from the US Treasury Secretary, Henry Paulson. Further details are expected overnight.

The US Federal Reserve plans to create a special-purpose entity that would acquire a wide range of consumer and business debt, including troubled loan assets - echoing the initial mandate of the $US700 billion Troubled Asset Relief Program (TARP).

Australian stocks responded with strong gains. BHP Billiton was up $2.84, or 12.15 per cent, to $26.22, while takeover target Rio Tinto advanced $4.10, or 6.86 per cent, to $63.90.

Among bank stocks, Commonwealth Bank jumped 12.5 per cent, National Australia Bank rose 5.7 per cent, ANZ gained 12.8 per cent and Westpac 8.1 per cent.

Nobody was reading too much into the latest manic upswing in market sentiment. "We think this is just the ongoing insanity of the current situation in the market," Peter Spann, a director of stockbroker Freeman Fox, said.

"The type of swings we've seen in the markets, of 25 per cent in a couple of weeks, of 12 per cent in a day - this is insanity unrelated to the fundamentals of the market."

An ABN Amro Morgans private client adviser, Bill Bishop, said: "There's a surge of hope . . . But will it catch from here and go higher? That remains to be seen.

"But there's much more green on that screen than we're used to," he said. Citigroup bail-out - Page 24 Australia joins in- Page 26

© 2008 Sydney Morning Herald

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