Asian stocks saw a turnaround in trade Tuesday after a dramatic 100 basis point rate cut by the Reserve Bank of Australia. Markets were paring back sharp losses that had seen the Nikkei crashing the 10,000 level at one point in the session.
The Australian dollar initially fell towards four-year lows against the U.S. dollar after the RBA's announcement. But then jumped back up almost 2 percent against the greenback and 3 percent against then yen page90$$AUDJPYfalsefalse43pricetruefalsefalsefalsefalse0QuotefalsetrueChartfalsetrueNewsfalsetrueProfilefalsetrueAdd to Watchlistfalsetruetruehttp://api-cdn.cnbc.com/api/chart/chart.aspGE4true3.CNBC.com Pre-MarketsWorld Markets OverviewU.S. futures and Pre-Market DataGet Credit Spreads Data Here
The U.S. dollar and the euro jumped to session highs against the yen, stirring talk of coordinated central bank action to stem the worsening credit crisis. The dollar rose as much as 0.8 percent from late U.S. trade to a high of 102.62 yen, up sharply from the six-month low of 100.22 yen hit the previous day. The euro climbed 0.8 percent to 138.60 yen, up from a three-year low hit on Monday.
Crude oil futures were also on the rebound, edging above $89 a barrel in the Asian session.
In a developing story, the U.S. Treasury Department and the Federal Reserve are considering additional steps to support strained commercial paper markets, a source familiar with the discussions said. Among steps under consideration would be funding a special purpose vehicle as opposed to outright purchase of commercial paper, the source said. Strained commercial paper markets are seen as a major destabilizing force in financial markets. The Fed and an interagency group that includes the Treasury hinted at those efforts earlier on Monday in separate statements.
Australian shares reversed sharp losses, finishing 1.7 percent higher after a surprise and dramatic rate cut by the central bank. The Reserve Bank of Australia cut its benchmark cash rate 100 basis points to 6.0 percent, a greater-than-expected cut as turmoil in global markets clouded the economic outlook while tightening financial conditions. The RBA's easing, announced following its monthly policy meeting, was the second in as many months, and the first move of that magnitude since December, 1994. The S&P/ASX 200 Index was down as much as 3 percent in the morning session.
Japan's Nikkei 225 Average fell 3 percent to post a five-year closing low as panic over the global financial crisis prompted investors to dump stocks. The benchmark had fallen more than 5 percent in the morning but trimmed those losses on bargain hunting and after the RBA's rate cut raised hopes that more countries would take measures to contain the crisis. Automakers were the worst hit with Toyota Motor and Nissan Motor both down over 4 percent.
South Korea's KOSPI reversed early losses to close half a percent higher, led by exporters that could benefit froma weaker won currency, while some defensive telecommunications and consumer issues also advanced. Samsung Electronics, the world's No.1 memory chipmaker rose 2.71 percent, and LG Electronics, the world's No.4 handset maker, climbed 3.9 percent.
Singapore's Straits Times Index reversed initial sharp losses to close 0.6 percent higher with bank issues such as DBS Group swinging into the black. Shares in shipping firm Neptune Orient Lines rose over 5 percent as investors hoped its bid to buy Germany's Hapag-Lloyd from TUI might be delayed, following opposition from a TUI shareholder.
China's Shanghai Composite Index rebounded from a sharp early slide to close 0.7 percent lower. Banks and property shares were the leaders. Bank shares bounced after Industrial & Commercial Bank of China and other top banks sank in early trade to near levels where government investment fund Central Huijin is believed to have bought them late last month, as part of an official rescue plan for the market. This prompted speculation that Central Huijin might soon resume buying.
Markets in Hong Kong are closed today for a public holiday. They will reopen on Wednesday.