* Nations more coordinated in response to crisis
* Gold climbs as caution lingers
* Damage to credit markets needs time to fix
(Repeats to additional subscribers with no change to text)
(Updates prices, adds European outlook, quotes)
By Kevin Plumberg
HONG KONG, Oct 13 (Reuters) - Asian stocks bounced 5
percent from a four-year low on Monday after policymakers
around the world took increasingly bold steps to rescue the
financial system, including guaranteeing bank desposits and
taking stakes in banks.
However, the yen stayed firm against the U.S. dollar and
gold also edged up, highlighting investor caution and an
unwillingness to dive back into risk-taking just yet,
especially with credit markets still barely functioning.
Major European stock markets were expected to open as much
as 5.3 percent higher, according to financial bookmakers, and
U.S. stock futures <SPc1> rose 4.9 percent after the U.S.
government said it would inject capital directly into financial
institutions, and European leaders hatched a plan that included
buying bank debt. []
Global equity markets were gutted last week, and investors
even liquidated positions in safe havens like government bonds
for cash, on dwindling hopes that anything could be done to
keep the global economy from sliding into recession.
Japan's stock market plunged 24 percent last week, twice
what it lost in the week of the 1987 crash, while U.S. stocks
dropped 18 percent, their biggest weekly decline ever.
"Markets are hugely technically oversold and everyone is
starved of good news, so it won't take much to trigger a relief
rally. But that's unlikely to be the end of the story," said
Geoff Lewis, head of investment services for JF Asset
Management in Hong Kong.
"Until we see a return of risk appetite, it's difficult to
see how Asia can outperform in line with its relatively
superior fundamentals," said Lewis, who anticipated more
pressure on banks from their consumer and commercial lending
arms.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> climbed 5 percent after slumping by more than a
fifth last week to the lowest since December 2004.
Australia's benchmark S&P/ASX 200 index <> ended 5.6
percent higher, clawing back some of last week's 16 percent
decline, on a blanket guarantee of all bank deposits from the
Australian government.
Hong Kong's Hang Seng index <> climbed 3.2 percent
after losing 16.2 percent last week. China Mobile shares
<0941.HK> were the biggest boost to the index, and large bank
stocks rallied after dipping earlier in the session.
Japan's markets and the U.S. Treasury market were closed
for holidays on Monday.
VALUE, CAUTION
Last week's flight from global equity markets hit both
developed and developing markets hard, and some money managers
cautioned against wading back into emerging market assets.
Jennifer Tay, Asia-Pacific head of portfolio counselling
for Citi Private Bank, said she is urging clients to stay
invested in defensive sectors like healthcare, utilities and
infrastructure.
"For the next few months, anything that is emerging markets
oriented, they would have a further beating," she said at a
Reuters Wealth Management Summit in Singapore. []
Panic last week about the fate of the global financial
system also ripped apart credit spreads and sent volatility
soaring.
Wall Street's best known fear gauge, the Chicago Board
Options Exchange Volatility index (VIX) <.VIX> roared to an
all-time high of 76.94, having more than trebled in the last
month.
The spread of 3-month London interbank offered rates, used
between some large banks, over the 3-month U.S. Treasury bill
yield widened to a record 459 basis points, after blowing out
359 bps in the last month. The spread is essential to proper
functioning of lending markets as it indicates perceived
counterparty risk over a so-called risk-free rate.
The widespread measures announced over the weekend appear
to have supported confidence among investors that policymakers
will coordinate their efforts to stem the worst financial
crisis since The Great Depression.
However, the sort of rapid damage inflicted to the
financial system and the radical measures being employed to
mend it will likely have deep repercussions.
"A palpable sense of a turn in the markets this morning
demands a cautionary warning. There will be consequences for
global governments circumventing banks' core disintermediation
roles in the credit and cash markets," said Brett Williams,
credit analyst with BNP Paribas in Hong Kong in a note.
The yen dipped against the euro as equity markets rallied
though it was steady against the U.S. dollar. The euro rose to
136.22 yen after trading at 134.97 yen late in New York on
Friday <EURJPY=R>. The U.S. dollar slipped a bit to 100.20 yen
<JPY=>, down from 100.64 yen on Friday.
The price of spot gold <XAU=> rose 1.8 percent to $862.40
an ounce, helped by the weaker U.S. dollar against the euro,
after tumbling 7 percent on Friday as investors closed out of
positions and stayed on the sidelines.
U.S. light crude futures were up 3.6 percent to $80.48 a
barrel <CLc1> in a relief rally after hitting the lowest
settlement since Sept. 2007 on Friday.
(Additional reporting by Jeffrey Hodgson and Saeed Azhar in
SINGAPORE; Editing by Lincoln Feast)
