World markets showed further signs of recovery on Tuesday, with stocks in Asia and the Pacific rising on hopes of another United States economic stimulus package and a thaw in frozen credit markets.
Investors took their cue from Wall Street where stocks soared on Monday as US Federal Reserve chief Ben Bernanke threw his support behind another government spending package to kick-start the world's largest economy.
Interbank lending rates were also fixed lower on Monday, fuelling a belief that government rescue plans were beginning to free up frozen money markets.
MSCI's all-country world stock index, a broad measure of global stock market performance, rose for the third trading day in a row and was nearly 12% above five-year lows hit on 10 October. It remains down 39% year-to-date, however.
European shares also rose in early trade on Tuesday, extending their winning streak to a third day, with investors cheered by Dr Bernanke and French government moves to bolster its banks.
Tokyo's Nikkei ended up 3.34%, while Australia's benchmark index gained 3.9% and the New Zealand market was up 2.1% at the close of trade.
However, markets in South Korea closed down almost 1%, while Hong Kong stocks fell 1.8%.
On Monday, the Dow industrials index had leapt 4.67% on Wall Street.
But market watchers said recession fears in the US, Japan and Europe, as well as jitters about the outlook for corporate earnings, may limit the scope for a further rebound on battered global stock markets.
China's weaker-than-expected economic growth figures released on Monday highlighted the extent to which the credit crunch has spread around the world.
Governments work to keep credit flowing
Governments have pumped billions of dollars into troubled banks in recent weeks while central banks have injected huge amounts of cash into money markets in an effort to ease a credit crunch.
The danger of a "global catastrophe" has decreased after world governments intervened to boost liquidity and confidence in the financial system, Australian central bank chief Glenn Stevens said.
Analysts agreed, noting that the cost of one bank borrowing from another had eased, suggesting that the credit crunch is abating somewhat.
Governments continued their efforts to keep credit flowing and ward off a financial system meltdown.
The French government said Monday that it would inject 10.5 billion euros into the country's six biggest banks. Sweden presented a plan worth $US200 billion to help its financial sector if it comes under more pressure from the credit crisis.
Australia's corporate watchdog on Tuesday extended a ban on covered short selling of shares until November, saying the volatile market needed more time to settle.
Critics of short-selling - when investors sell shares they do not yet own in order to profit later from an anticipated fall in prices - say the practice has contributed to the recent plunges on global stock markets.
Oil prices rose as expectations grew that the OPEC producer cartel will unveil plans to cut its output this week. New York's light sweet crude for November delivery gained US26 cents to $US74.51 a barrel in Asian trade.