HONG KONG, Oct 29 (Reuters) - Asian stocks and government bonds rallied on Wednesday, on hopes the Bank of Japan and the Federal Reserve will cut interest rates this week to spur growth, while credit markets continued to show signs of recovery.
Oil prices also rose as investors latched on to the upward momentum in global equities, hoping for a sustained revival in willingness to take risks for higher returns.
Attractive valuations in almost every industry inspired the stock market rally, taking place after a brutal sell-off that has seen Japan's Nikkei index .N225 fall as much as 40 percent in the past month.
Central banks around the world were expected to lower benchmark interest rates further to support growth in coming days. The Fed is widely expected to cut its key rate for the ninth time since September 2007 later on Wednesday, and the Bank of Japan will consider lowering its policy rate at a meeting on Friday, according to sources familiar with the matter. The Bank of England and the European Central Bank were both forecast to lower borrowing costs as well next week. [ID:nN28606033]
How much any of these actions will turn around near-term prospects for major economies is unclear, especially since the U.S. labour market is forecast to have lost nearly 180,000 jobs this month and economists from JPMorgan to UBS see the global economy sliding into recession.
"Given the severe recession into which the global economy is slipping, it is likely that we have not seen the bottom of the stock market yet, and this week's recovery presents a good opportunity to sell," said Dariusz Kowalczyk, chief investment strategist with CFC Seymour in Hong Kong in a note.
The Nikkei .N225 rose 6.4 percent, after plumbing its lowest since 1982 on Tuesday. The index is still down 21 percent in October, causing speculation that Japanese banks have likely taken big hits on their domestic portfolios.
Nomura Holdings Inc, (8604.T: Quote, Profile, Research, Stock Buzz) Japan's largest brokerage, posted its third consecutive quarterly net loss on Tuesday and warned of potential losses on exposure to crisis-hit Iceland and further write-downs on its stake in Fortress Investment Group. (FIG.N: Quote, Profile, Research, Stock Buzz).
Asia-Pacific stocks outside Japan climbed 5 percent after touching a 4-year low on Tuesday, according to an MSCI index .MIAPJ0000PUS.
Hong Kong's Hang Seng index .HSI rose 4.7 percent after soaring 14.4 percent on Tuesday in the biggest rally in 11 years. China Mobile stock (0941.HK: Quote, Profile, Research, Stock Buzz) led the index higher, rising 4.7 percent, but a 2.8 percent decline in HSBC shares (0005.HK: Quote, Profile, Research, Stock Buzz) held its rise below the benchmark MSCI.
