New central bank action helps steady world shares

LONDON (AFP) - European stocks rallied Monday as central banks made new multi-billion dollar cash injections in a bid to steady global markets' fears of a credit crunch.

Shortly after Monday's open, London's FTSE 100 of leading shares stood 1.39 percent higher at 6,122.10 points. In Frankfurt the DAX 30 gained 0.95 percent to 7,413.30 points and the Paris CAC 40 climbed 1.19 percent to 5,513.67.

The European Central Bank said the eurozone banking market was returning to normal but plans to make another cash injection Monday. The ECB pumped a record 155.85 billion euros (212.98 billion dollars) into the market in two days last week.

"The ECB notes that money market conditions are normalising and that the supply of aggregate liquidity is ample," it said in a statement.

Japan's central bank said Monday it would pump another 600 billion yen (5.0 billion dollars) into the money market, on top of a one-trillion-yen injection on Friday.

Some Asian share markets also made wary gains after the hammering they also took last week because of the worries over the US mortgage market.

Japanese prices ended mixed as central bank action to fend off a credit crunch comforted jittery investors.

The Tokyo Stock Exchange's benchmark Nikkei-225 index closed up 35.96 points, or 0.21 percent, at 16,800.05, after plunging 2.37 percent Friday to a near five-month low.

Markets have been badly hit by worries over the US subprime mortgage sector, which provides home loans to people with poor credit histories. Some investors fear the US housing woes may weaken global economic growth.

The European, US and Japanese central banks pumped tens of billions of dollars into the markets on Thursday and Friday helped to ease the panic.

But few analysts say the crisis is over and attention was fixed on how the New York market starts the week.

Despite the steadier market, the rally could be short-lived, according to many economists.

David Jones, chief analyst at CMC Markets, said: "It would be naive to think the worst is behind us. It wouldn't be surprising to see the (London) market test the 6,000 barrier this week."

ABN Amro economist Melinda Smith commented: "There does seem to be an overall sentiment in the market that the credit problems from last week may worsen before they get can better."

Sentiment was clearly more comfortable Monday following the rout of recent days -- which saw London's FTSE 100 shed 2.99 percent last week, including a massive 3.71 percent on Friday.

The DJ Euro Stoxx 50 index of top eurozone shares advanced 1.06 percent to 4,205.95 points in early trade.

Tokyo's Nikkei index had gained nearly 200 points in morning trade as fears of further sharp falls eased, but it had lost most of the gains by the closing bell after cautious investors cashed in.

Dealers said the mood was cautious as the market waited anxiously to see whether Wall Street could maintain Friday's late recovery.

"Fund injections by central banks here and in the US, as well as Europe and elsewhere, helped diminish the downside prospects for the world's stock markets, although investors are still cautious," said Hiroichi Nishi, an equities information manager at Nikko Cordial Securities.

Hong Kong share prices closed 0.45 percent higher as index heavyweight China Mobile gained on expectations that it will report strong first-half results this week.

But trade was volatile and volume relatively light because of the subprime crisis.