Asian stocks rise on G20 summit pledge

Asian stocks extended a rally in early trade on Friday as investors cheered a pledge by world leaders to step up efforts to fight the global economic downturn.

The dollar shot up to a five-month high against the yen as the recovery on world markets encouraged speculators to take more risks.

While the G20 summit stopped short of unveiling fresh fiscal spending to tackle the slump, it did provide for more than a trillion dollars of new money to help poorer countries as well as moves to increase global regulation.

Although many admit it will not scoop the world out of recession immediately, markets were relieved that leaders had at least managed to set aside their earlier differences over how to tackle the crisis.

"Investors were relieved that concerns over a lack of unity were proven unfounded, which bodes well for future international cooperation to tackle the crisis," said Dariusz Kowalczyk, chief investment strategist at SJS Markets.

But risks remain, including insufficient fiscal stimulus spending in many key economies, he warned.

"After the run-up over the past four weeks, equities and commodities are ripe for profit taking" said Kowalczyk.

Asian markets were mostly higher in early trade, although gains were much more modest than the previous day.

Tokyo was up 0.57 percent while Sydney added 1.3 percent, Seoul gained 0.4 percent and Hong Kong climbed 0.3 percent.

Markets rose on a "wave of euphoria courtesy of a G20 coordinated front to tackle problems," said Societe Generale analyst Patrick Bennett.

The rises came a day after a powerful rally across the region that saw Hong Kong soar 7.4 percent and Tokyo jump 4.4 percent to hit a near three-month high.

On Wall Street, the Dow Jones Industrial Average rose 2.79 percent Thursday after the Group of 20 pledged more than one trillion dollars for the International Monetary Fund and World Bank.

British Prime Minister Gordon Brown said that by the end of 2010 the Group of 20 developed and developing nations would have spent five trillion dollars fighting the economic crisis.

Investors were also encouraged by news of a revamp of US accounting rules that should ease funding pressures for financial firms, dealers said.

Data pointing to an improvement in the giant Chinese manufacturing sector were also a "very positive piece of news," said Bennett at Societe Generale.

"A rising tide lifts all boats, though there are enough challenges ahead both regionally and globally that we continue to err toward caution," he added.

Stocks got an extra boost by a 1.8-percent rise in orders for US manufactured goods in February after six consecutive monthly declines, the latest sign that the decline in industrial activity may have hit bottom.

Improving sentiment helped the dollar to rise above 100 yen briefly for the first time since early November.

Global stocks have risen over the past four weeks as confidence returns to markets following a number of stimulus measures by governments and a US pledge to help banks clear their books of toxic assets that have clogged lending.

But some analysts warned that markets could be disappointed if key monthly labour market data due out later in the day shows a sharp rise in unemployment.

"There is a gap between market hopes and reality," Sumitomo Trust and Banking forex strategist Saburo Matsumoto said. "Investors may have a rude awakening."