Asian trade: Asian markets opened higher, as it seems that Japan is preparing a new stimulus bill. U.S. futures rose strongly in the Asian session, having the S&P already gain 9.70 points, or 1.27%.
Equity markets advanced as governments appear ready to step into the financial markets again. Asian markets rose after the Japanese finance minister said a $200 billion stimulus package would not be excluded. This is Japan’s second attempt to save the economy through a stimulus bill this year. Despite this, estimates are that the economy will contract a whopping 5% this year.
In the U.S., the current administration is preparing to unveil the new plan meant to remove toxic assets from banks’ balance sheets. It is speculated that, the Treasury (together with banks) will organize an auction sale of distressed assets, something that should assure a fair price for both the seller and the buyer. In the same time, the Treasury will provide as much to 80% of the needed capital in the form of a loan, while the toxic assets’ buyer will have to put the remaining 20%. This decision is to revive the mortgage market, while at the same time free some space on the banks’ balance sheets.
Among other things, the current plan treats the toxic assets simply as undervalued assets because of the low liquidity environment. It is worth nothing that most of these assets are very close to some sort of default state, as the real estate business plunged to the double-digit percentages in most U.S. areas. Therefore, the Treasury takes a lot of risk by covering 80% of the deal, something that could prove to be unhealthy for the taxpayers. Additionally, some market commentators have said the Treasury’s behavior is similar to a hedge fund.
Tonight, the Nikkei rose 163.06 points (2.04%) to 8,108.02. The Australian S&P/Asx added 47.60 points (1.37%) to 3,513.40.
Crude oil advanced on positive equity markets. Crude oil for April delivery gained $0.50 to $52.50.
Gold traded side-ways in the Asian session. Bullion for immediate delivery fell $2.40 to $952.60.