Global markets in mixed reactions after USA’s 700-billion-dollar proposal

Global markets were mixed Monday after the U.S. government proposed a US$700 billion plan to solve the world financial crisis by rescuing banks from billions of dollars in risky mortgage debt.

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European markets, after edging higher in early trading, had fallen by afternoon in Europe. Britain's FTSE 100 lost 0.39 percent to 5,290.82, Germany's DAX slumped 0.30 percent to 6,170.83 and France's CAC 40 dropped 0.11 percent to 4,320.01.

"There was massive reaction on Friday, today there is an element of profit-taking and a bit of reality of people worrying about the world economy as we see the price of oil move higher again," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald.

"As the week develops there should be some concrete proposals coming through," he added.

In Asia, investors were more upbeat. In Japan, the Nikkei 225 index climbed 1.4 percent to close at 12,090.59 points, while Hong Kong's Hang Seng Index rose 1.6 percent to 19,632.20.

In China, the Shanghai Composite Index soared 7.8 percent on hopes of a turnaround after government steps to stabilize the country's beaten down shares. Markets in Australia and Taiwan advanced strongly after their regulators issued curbs on short selling, following similar moves in the U.S., Britain and other countries. The practice, which bets on a stock's decline, has been partly blamed for driving down share prices.

Global markets had rallied Friday on news Washington was likely to enact a bailout plan, calming investors worried that losses from bad bets on mortgages could bring about the collapse of more companies, straining an already weakened financial system and global economy.

As a rough outline of the plan took shape over the weekend, the Bush administration continued to lobby lawmakers Sunday for authority to use US$700 billion to buy up a mountain of bad debt at the heart of the crisis.

While the proposed bailout lifted sentiment for the time being, there were still a number of uncertainties about the plan and the general health of financial firms that could further unsettle markets in the coming days, an analyst said.

"This should stem the bleeding, but the patient is still very fragile," said Thomas Lam, a senior economist at the United Overseas Bank in Singapore. "The list of uncertainties is pretty long."

Meanwhile, cash demand showed some signs of easing as European central banks offered more liquidity to money markets.

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