Global Markets Surge On Dow Rally

U.S. stock futures rose Tuesday as investors appeared poised to extend a rally that sent the Dow Jones industrial average back above 14,000 and to a record close.

The market, eager for more evidence to support the case for further interest rate cuts, will examine reports on September sales from the world's top automakers. The calendar for economic data is otherwise expected to be light.

A report of weaker than anticipated manufacturing activity last month bolstered the case for an interest rate cut and was a partial contributor to Monday's advance, in which the Dow gained nearly 192 points to close at 14,087.55, a new high. The blue chips returned to the 14,000 level for the first time since mid-July, before the credit market crisis began pummeling stock prices.

The Federal Reserve holds a two-day meeting beginning Oct. 30, when the central bank will decide whether to follow its Sept. 18 interest rate cuts with a further reduction.

Dow futures for December rose 24, or 0.2 percent, to 14,181. Standard & Poor's 500 futures rose 2.10, or 0.13 percent, to 1,558.70. Nasdaq 100 index futures added 3.75, or 0.18 percent, to 2,139.00.

Bond prices fell as yields rose. The 10-year Treasury note yielded 4.58 percent, up from 4.55 percent late Monday.

With the start of the fourth quarter Monday, institutional investors moved heavily into stocks, but trading was also influenced by a growing sentiment that the worst of the credit problems may have passed. Although Citigroup Inc. and UBS AG issued warnings for the third-quarter results, investors appeared convinced that the coming quarter will see a return to healthier results for financial institutions hurt by failing mortgages.

Stock markets advanced overseas on the heels of Monday's Wall Street rebound. Britain's FTSE 100 gained 0.27 percent, Germany's DAX index rose 0.53 percent, and France's CAC-40 rose 0.74 percent.

Asian markets rallied Tuesday also, as investors were heartened by news of the record close overnight on Wall Street. Benchmark indexes in Hong Kong, Singapore, South Korea and Australia all hit records.

In Tokyo, Japanese stocks rose to a two-month high on optimism about the U.S. economy - a key export market for Asia. The Nikkei 225 index climbed 200.82 points, or 1.2 percent, to 17,046.78 points, the highest since Aug. 9. Exporters like Sony Corp. and Nissan Motor Co. led the advance.

Money flowing from the Chinese mainland lifted Hong Kong's Hang Seng index a stunning 1,057.28 points, or 3.9 percent, to 28,199.75, as it surpassed the 28,000-level the first time.

"The market is flush with abundant liquidity, with investors buying into China plays," said Francis Lun, general manager at Fulbright Securities. "Property stocks are also rising on hopes of further interest rate cuts" in the U.S., which usually lead to lower local rates due to the Hong Kong dollar's peg to the U.S. currency.

China-related companies led the market higher, with heavyweight China Mobile, the country's largest mobile phone operator by subscribers, rising 6.4 percent to HK$135.40.

Investors across Asia were cheered by news that the Dow Jones Industrial Average hit a new record Monday, rising 1.4 percent to 14,087.55. The previous closing record of 14,000.41 was set in mid-July before the credit crisis erupted.

But some traders in Hong Kong cautioned that many stocks, especially H-shares - or those of mainland companies listed in Hong Kong - appear overvalued. The Hang Seng index is up 41 percent since the start of the year.

"The market is becoming crazy and irrational. Stocks are highly overbought. The index may correct to the 23,800-point level if there is any bad news such as global credit woes worsening," said Peter Lai, director at DBS Vickers Securities Ltd.

Traders said the Hang Seng index will likely test the 30,000-point level this week, driven by strong liquidity as stock markets in mainland China are closed all week. Financial markets were closed in Hong Kong Monday for the National Day public holiday.

South Korean shares also surged to a new record, buoyed by South Korean President Roh Moo-hyun's visit to North Korea and prospects for improved business cooperation between the two Koreas.

Roh embarked Tuesday on a three-day trip to North Korea for only the second summit between the two sides since they were divided after World War II.

The Korea Composite Stock Price Index rose 51.42 points, or 2.6 percent, to close at 2,014.09, easily surpassing the earlier record close of 2,004.22 set in late July. It was the Kospi's seventh straight gain.