HONG KONG – Asian stocks extended their rally Tuesday after Wall Street surged on hopes the U.S. plan to rid banks of souring debts at the heart of the financial crisis will revive growth in the world's largest economy.
The gains were muted compared to those in the U.S., where leading benchmarks jumped around 7 percent or more, after Asian shares climbed ahead of Monday's announcement about the government's latest plan to solve the banking crisis. Financial firms across the region were strong, while a weaker yen buoyed Japanese exporters.
Investors worldwide appeared comforted after the Obama administration said it would aim to remove as much as $1 trillion in toxic securities and loans weighing down bank balance sheets — a key measure of the government's broader effort to restore consumer and company lending so crucial to economic activity.
A dose of better-than-expected news about the other big U.S. economic problem — the housing slump — added to upbeat mood. The report, showing a surprising increase in home sales, rekindle hopes that the hard-hit housing industry might finally be stabilizing.
But analysts cautioned that investor sentiment, while recovering in the short term, was still fragile. Lingering doubts hanging over the U.S. plans — about how to price the assets and account for the losses, among others — could douse in the coming days what many believe is still bear market rally, which eventually fizzles.
"At the end of the day there has been no game changer even if the plan is implemented perfectly. And that's an enormous 'if,'" said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
In Japan, the Nikkei 225 stock average gained 266.55, or 3.2 percent, to 8,482.08, and Hong Kong's Hang Seng index was up 213.87 points, or 1.6 percent, at 13,661.29. South Korea's Kospi gained 1.7 percent to 1,220.33.
Elsewhere, Shanghai's index rose 0.9 percent, Australia's stock measure added 0.8 percent and Taiwan's benchmark was up 2.3 percent. India's Sensex traded 2.3 percent higher at 9,646.59.
Asian markets were supported by Wall Street's spectacular rise overnight.
Cheered by news about the banks and housing sector, investors sent stock surging, and the Dow rose 497.48, or 6.8 percent, to 7,775.86, its highest finish since Feb. 13.
The Standard & Poor's 500 index rose 54.38, or 7.1 percent, to 822.92, crossing the psychological milepost of 800.
But Wall Street was poised to give up some its gains after U.S. futures fell. S&P futures were down 0.1 percent at 816.9.
Oil prices dipped in Asia, with benchmark crude for May delivery down 17 cents at $53.63. The contract rose $1.73 to settle at $53.80 overnight.
In currencies, the dollar rose to 98.15 yen from 97.10 late Monday in New York. The euro rose to $1.3673 from $1.362