Volatility grips world stock markets

LONDON (AFP) - Volatile trading dogged world stock markets on Friday ahead of a key announcement from US President George W. Bush aimed at stimulating the battered US economy.

London's leading share index rose by more than 1.0 percent near the half-way mark, while Tokyo ended higher after tumbling by almost 3.0 percent earlier Friday.

President George W. Bush was on Friday to announce "short-term, temporary measures" to stimulate the economy, said White House spokesman Tony Fratto, amid fears that the world's biggest economy is heading for a sharp downturn.

"Everyone is waiting for the announcement of the US stimulus package" said Shunichi Umemoto, analyst at Tokai Tokyo Research Center.

"We just have to see how many details President Bush will announce."

Nearing midday, London's FTSE 100 index of leading shares showed a gain of 1.39 percent at 5,984.20 points. Frankfurt's DAX 30 edged up 0.08 percent to 7,419.31 points and the CAC 40 in Paris gained 0.27 percent to 5,171.13.

Global stocks have fallen sharply this week on fears that a US recession could have far-reaching implications.

In Asia on Friday, the Tokyo Stock Exchange's benchmark Nikkei-225 index ended up 0.56 percent in anticipation of the measures by Bush, staging a dramatic late turnaround after tumbling 2.81 percent in the morning.

Hong Kong dropped 1.22 percent but off its lows while losses in mainland China were limited with the Shanghai Composite index down 0.31 percent.

Other bourses also trimmed or reversed their falls, with Seoul closing up 0.6 percent, Sydney down 0.8 percent and Taipei up 1.02 percent in late bargain-hunting. Singapore was 0.38 percent lower.

US shares plummeted to fresh lows Thursday after US Fed Chairman Ben Bernanke said the foundering US economy could use a stimulus package and as finance giant Merrill Lynch reported a huge loss.

Bernanke "lent his support to the idea of a temporary fiscal stimulus, the general thrust of which looks likely to be revealed by President Bush later today," said Calyon analyst Daragh Maher.

The Dow Jones Industrial Average sank 2.46 percent to close at 12,159.21, the lowest level for blue chips since March 2007.

The tech-heavy Nasdaq composite lost 1.99 percent to 2,346.90 and the broad-market Standard & Poor's 500 dropped 2.91 percent to end at 1,333.25.

The problems facing the US stem from subprime mortgages that flourished at the end of a US housing boom as lenders offered loans to people with shaky credit histories.

But a wave of defaults on the loans has left US and global banks with mortgage-linked investments nursing billions of dollars in losses. The subprime crisis has also led to a credit crunch, threatening the overall economy.

"Whether the (Bush) stimulus package will be sufficient or not, we don't know at this point, but how deep the US slowdown is will be the more critical part," said Suan Teck Kin, an economist at United Overseas Bank.