Global equities rally after GM bankruptcy filing

World stock markets rose sharply yesterday amid investor relief over General Motors filing for bankruptcy protection, some upbeat data on the US economy and a major rally in oil and metals prices.

On Wall Street, the Dow Jones Industrial Average climbed 2.41 per cent and the tech-heavy Nasdaq index soared 2.79 per cent in mid-day trading.

Earlier in the day, London's FTSE 100 index of leading shares closed up two per cent, Paris rose 3.11 per cent and Frankfurt shot up 4.08 per cent.

Asian markets also bounded on the back of economic recovery hopes, with Hong Kong rising four per cent, Shanghai up 3.36 per cent and Tokyo up 1.63 per cent.

"The planned bankruptcy filing for GM - and prospect of a quick turnaround for the beleaguered car maker - is again adding to the cheer," said Matt Buckland, a dealer at online trader CMC Markets in London.

US President Barack Obama said his government's plan for General Motors, which filed for bankruptcy protection earlier yesterday, was "viable" and "achievable" and would give the US auto giant the chance to rise again.

"Working with my auto task force, GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again," President Obama said at the White House.

Stock markets were also buoyed by some encouraging data on the US economy.

The Institute of Supply Management said its index of the manufacturing sector, also known as the purchasing managers (PMI) index, rose to a higher-than-expected 42.8 per cent from the 40.1 per cent reported in April.

It was, however, still below the 50 per cent level that separates expansion and contraction. Analysts had expected the April figure at around 38.4 per cent.

Meanwhile US personal income posted a surprise jump in April fuelled by government stimulus and tax breaks but the Commerce Department data also showed wary consumers were still reluctant to spend in the midst of a recession.

"The labour market remains a major headwind to consumers," said IHS Global Insight chief US Economist Nigel Gault.

Looking forward, he forecast another "steep drop" in employment in May and consumers to remain being cautious.

"But we do expect spending to creep slowly higher in the second half of the year as the labour market deterioration becomes less severe," he said.

In Asia yesterday, Japanese share prices rose to an eight-month high point after data showed Chinese manufacturing continuing to expand, spurring buying from commodities investors as hopes grew for an economic recovery.

Hong Kong shares surged four per cent, following a pre-weekend rally on Wall Street, to end at the highest level since September.

In Europe, energy companies were boosted as crude prices soared above $68 a barrel for the first time in seven months, lifted by the Chinese data, a weak US currency and rising equity markets, traders said.

Mining companies also gained in value as industrial metals copper and nickel hit 2009 high points on expectations of keen demand from China.

Copper reached $5.020 a tonne in London trade for the first time since the start of October. Nickel, lead and tin gained to seven-month heights.

Prices rose firmly, "supported by positive Chinese PMI data," said analysts at Barclays Capital.

"Europe's financial markets rose between one and three per cent... with the mining sector leading the way as investors continued to buy into risky assets," said analyst Joshua Raymond at spread-betting firm City Index.