World Stocks Surge on U.S. Consumer Confidence

World stock markets shot higher Wednesday after a report showing Americans more optimistic about their economy strengthened hopes that the global recession would soon abate.

The swing higher lifted most industries and markets, with Hong Kong shares up 5 percent, following days of jittery trade amid concerns about the economy, debt ratings of Western countries and North Korea’s nuclear standoff. Oil prices hovered above $62 a barrel.

Bullish sentiment took hold after a key measure of U.S. consumer confidence jumped in May to its highest level since September, far surpassing most economists’ expectations.

It was a reassuring sign because any lasting recovery still hinges greatly on the spending moods of consumers, who make up more than two-thirds of U.S. economic activity and help drive demand for exports, particularly from Asia. The news, which trumped another dismal reading of the country’s housing industry, added to the case for a year-end revival of economic growth and sent Wall Street soaring.

But traders cautioned that markets, having rallied since March, are now being largely driven by hot money. The liquidity is pushing stock prices far above what many companies can actually earn without a dramatic pick up in economic activity in the coming months.

“The recovery that we have seen in the market so far has surpassed expectations and it remains to be seen if this trend will continue,” said John Mar, co-head of sales trading at Daiwa Securities SMBC Co. in Hong Kong.

“Finding investment ideas with lucrative upside is becoming far more difficult by the day. Current valuations are reflecting a very rapid global economic recovery and that seems unlikely,” he said.

As trading got underway in Europe, Britain’s FTSE 100 was up 0.4 percent, France’s CAC 40 gained 0.5 percent and Germany’s DAX rose 0.5 percent. Stock futures pointed to more gains Wednesday on Wall Street. Dow futures rose 20, or 0.2 percent, to 8,481 and S&P futures rose 2.6, or 0.3 percent, to 911.30.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average rose 127.96 points, or 1.4 percent, to 9,438.77 as the country’s export slump eased in April, adding to growing evidence that the recession is loosening its grip on the world’s second-biggest economy.

Elsewhere, Hong Kong’s Hang Seng surged 893.71, or 5.3 percent, to 17,885.27. Shanghai’s index added 1.7 percent, Australia’s benchmark was up 0.3 percent, Taiwan’s stock measure gained 3.1 percent, and Singapore’s index added 2.8 percent.

But South Korea’s Kospi slipped 0.7 percent to 1,362.02, overshadowed by the rising tension on the Korean peninsula. In a sign of North Korea’s increasingly aggressive posture, Pyongyang reportedly restarted a weapons-grade nuclear plant as world powers moved Wednesday to punish the regime, possibly with new sanctions.

While Asian markets have been among the world’s strongest since March, the region may still be hard pressed to sustain growth unless the U.S. economy turns around.

Prominent economist Nouriel Roubini, who predicted the financial crisis, said the U.S. is likely to emerge from recession toward the end of this year. But he expects the world’s largest economy to manage growth of only one percent for a year or two.

“I think there is too much optimism that the recovery is just around the corner,” Roubini told reporters Wednesday on the sidelines of a technology forum in Seoul, South Korea.

“A more sober analysis of the data suggests we’re closer to the bottom, there is light at the end of the tunnel, but it’s gonna take a while longer and the recovery’s gonna be weaker than otherwise,” he said.

Hopes of greater consumer spending emboldened Wall Street overnight, and the Dow rose 196.17, or 2.4 percent, to 8,473.49.

The S&P 500 index rose 23.33, or 2.6 percent, to 910.33, and the Nasdaq rose 58.42, or 3.5 percent, to 1,750.43.

Oil prices were higher in Asian trade, with benchmark crude for July delivery up 79 cents to $63.24 a barrel. On Tuesday, the contract rose 78 cents to settle at $62.45.

In currencies, the dollar inched higher to 95.35 yen from 95.26 yen. The euro was lower at $1.3963 from $1.3997.

___

AP Business Writer Kelly Olsen in Seoul contributed to this report.

5/27/2009 4:38 AM JEREMIAH MARQUEZ AP Business Writer HONG KONG