The Dow surged in early trading on Tuesday, shooting up more than 300 points before losing some of its earlier strength by noon. Wall Street's performance followed a rebound on world markets that saw Japan's Nikkei up 6.4 percent and Hong Kong's Hang Seng post its biggest single-day gain in more than a decade. European stocks were also up.
Japan's benchmark Nikkei 225 index was up 459.02 points, or 6.4 percent, to 7,621.92 after earlier falling to 26-year lows. Hong Kong's Hang Seng index rose a whopping 14.4 percent — its biggest gain in 11 years — to 12,596.29, a day after plunging more than 12 percent. South Korea's Kospi jumped 5.6 percent to 999.16.
Futures trading suggests that U.S. stocks will join the rally after weeks of extremely volatile trading.
The strong showing came amid talk of interest rate cuts in the United States and Britain. Investors were awaiting the start of a two-day meeting of the Federal Reserve that is widely expected to bring another reduction in interest rates.
The Bank of England was also expected to lower interest rates. Britain's central bank said the global financial system could lose $2.8 trillion to the credit crisis. Governments have agreed to inject around $4 trillion into banks and markets to contain the worst financial crisis since the Great Depression.
Meanwhile, Iceland's central bank raised interest rates Tuesday by 6 percentage points to 18 percent. The drastic move is aimed at propping up the country's frozen currency and markets, offering investors a high return for putting money back into the North Atlantic island's crippled financial system.
In Asia, Japan restricted investor bets on falling share prices, so-called "short selling," to try to end a stock market slide that has particularly hit its banking sector.
The Nikkei was helped somewhat during the session by the yen's depreciation against the U.S. dollar. The dollar, which fell to a 13-year low against the yen Friday, rose to 94.72 yen from 93.01 yen in early London trading. A weaker yen encouraged traders to buy shares in exporters whose export potential is limited by surging currency. Honda Motor Co. shares surged 14 percent, Toyota Motor Corp. jumped 7.8 percent, and Sony Corp. rose 9.6 percent.
In afternoon trading, the FTSE 100 index of leading British shares rose 4.56 percent, Germany's DAX index jumped 8.66 percent, and France's CAC-40 rose 3.15 percent.
Oil prices rose to nearly $64 a barrel Tuesday as a rebound in world stock markets bolstered investor confidence that had been weakened by fears of a world economic slowdown.
From wire reports