Asian equities enjoyed some of their steepest one-day gains of the year on Monday after the U.S. Federal Reserve cut the discount rate by half a percentage point on Friday. The Nikkei 225 closed up 3% at 15,732.48 and Hong Kong’s Hang Seng index gained 3.5% at 21094.72. The South Korean exchange Kospi was up 5.3% and the Jakarta Composite was up over 5% by mid-morning Monday. Singapore, Malaysia, and Taiwan gained 4% in morning trading. On Monday, the Bank of Japan injected another ¥1 trillion ($8.79 billion) into the money markets to follow its ¥1.2 trillion injection on Friday. By midday Monday, the MSCI Asia-Pacific index was up 4.2% to 142.95, its biggest jump in over four years. The Shanghai Composite was up 4.5% at 4866, bringing its gain since the beginning of 2007 to 82%. Europe also joined in the rally, with the FTSE-100 (London), the CAC-40 (Paris) and the DAX (Frankfurt) all posting gains. "Today there’s a huge sense of relief in equity markets,” said a senior trader in Singapore. Still, warned Nikko Citigroup strategist Patrick Mohr, "We're in an environment where the market is sensitive to news flow...And we probably haven't seen the end of the bad news in subprime."
Sources: MarketWatch, Bloomberg, Financial Times, CNBC.com, Wall Street Journal
Commentary: Fed Cuts Key Rate • Friday's Rate Cut: A Sign Things Are Really Bad • Fed Sets Up for Possible Rate Cut In September
Stocks/ETFs to watch: AGG, DIA, SPY
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