Asia stocks cautious on bank rescue hopes

By Kevin Plumberg

HONG KONG (Reuters) - Most Asian stock markets rose slightly on Monday after policymakers around the world took increasingly bold steps to rescue the financial system, including guaranteeing bank deposits and taking stakes in banks.

However, the yen and gold also edged up, highlighting investor caution and an unwillingness to dive back into risk taking, especially with credit markets still barely functioning.

U.S. stock futures rose 2.9 percent, pointing to a sharply higher open on Wall Street, after the U.S. government said it would inject capital directly into financial institutions, and European leaders hatched a plan that included buying debt that banks issue, both of which may help free the flow of precious credit.

Global equity markets were gutted last week, and investors even liquidated positions in safe havens like government bonds for cash, on dwindling hopes that anything could be done to keep the global economy from sliding into recession.

Japan's stock market plunged 24 percent last week, twice what it lost in the week of the 1987 crash, while U.S. stocks dropped 18 percent, their biggest weekly decline ever.

"The market was looking oversold so it was ripe for a bounce, it just needed a bit of good news," said David Cassidy, chief equities strategist at UBS in Sydney.

Australia's benchmark S&P/ASX 200 index .AXJO was up 3.2 percent, clawing back some of last week's 16 percent decline, on a blanket guarantee of all bank deposits from the Australian government.

The MSCI index of Asia-Pacific stocks outside Japan climbed 1.6 percent after slumping by more than a fifth last week.