China stimulus plan boosts stocks and commodities

By Eric Burroughs

HONG KONG (Reuters) - Asian stocks and commodity prices climbed on Monday after China unveiled a nearly $600 billion (382 billion pounds) economic stimulus plan, one of many steps countries are taking to limit the economic fallout from the financial crisis.

Japanese government bonds and U.S. Treasuries retreated as funds flowed back into riskier assets on hopes for stimulus measures by other major economies, with U.S. President-elect Barack Obama pushing for urgent passage of more fiscal spending in the world's largest economy.

The positive tone seen in Asian equity markets was expected to spill over into Europe, with European shares set to rise 3 percent or more, according to financial bookmakers.

The yen fell as investors embraced the high-yielding Australian dollar after China's announcement and as financial officials from the Group of 20 economic powers, which include major developing countries, ironed out ways to stimulate growth at a weekend meeting.

Glenn Maguire, Asia chief economist at Societe Generale, said interest rate cuts, bigger government spending globally and a likely recovery in corporate investment next year should sow the seeds for an economic rebound.

"Economic activity can only accelerate. Beware of the doom merchants," Maguire said.

The damage inflicted by the worst financial crisis since the Great Depression was highlighted by data on Friday showing the U.S. jobless rate hitting a 14-year high and Japanese data on Monday showing machinery orders suffered the biggest quarterly fall in a decade.

Japan's Nikkei share average .N225 rose 5.8 percent as market players covered short positions and as hopes for a pick-up in demand from China boosted shares of machinery makers such as Komatsu Ltd (6301.T).