BANGKOK - World markets were mostly higher Monday as investors plowed cash into stocks amid expectations the U.S. Federal Reserve will take action to prevent the American economy from slipping back into recession.
Oil prices rose to near $83 a barrel while the struggling dollar edged up against the yen and fell against the euro. Wall Street was set to open higher with Dow futures up 20 points, or 0.2 per cent, to 10,967.00.
European shares advanced modestly in early trading. London's FTSE 100 index was up 0.2 per cent to 5,668.10. Germany's DAX index gained 0.2 per cent to 6,301.51 and France's CAC-40 index added 0.4 per cent to 3,776.21.
Those gains followed a jump higher in most major markets in Asia, where Hong Kong's Hang Seng index closed up 1.2 per cent to 23,207.31. Australia's S&P/ASX 200 rose 0.3 per cent to close at 4,697.50, the index's highest close since May 5.
The Shanghai Composite Index jumped 2.5 per cent to 2,806.94 while South Korea's Kospi shed 0.4 per cent to 1,889.91. Markets in India and Singapore also rose while Taiwan, Indonesia and Malaysia lost ground.
Japan's financial markets were closed for a public holiday.
Expectations that the Fed — faced with chronically high unemployment — will act at its next meeting in November to prevent a "double dip" recession by forcing long-term interest rates even lower is driving money into stocks, analysts said.
"There's a lot of hot money flowing into the stock market. Investors don't want to hold cash," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
The U.S. jobless rate has been at or above 9.5 per cent for 14 months — the longest stretch since the Great Depression. The unemployment crisis makes it all but certain the Fed will act at its Nov. 2-3 meeting to try to rejuvenate the economy.
Unemployment has become a political issue ahead of U.S. congressional elections on Nov. 2, when voters anxious over the economy will decide whether to keep Democrats in power.
"High unemployment is a political problem, so the Fed will ... flood the market with liquidity," Lun said. "With all this money, it's no wonder people will use it to buy stocks."
The prospect of Fed action lifted stocks on Wall Street on Friday, when the Dow Jones industrial average closed above 11,000 for the first time since May. It finished up nearly 58 points to 11,006.
The Fed will likely buy billions more in government debt to further drive down rates on mortgages, corporate loans and other debt. The idea is that even cheaper loans might get Americans to increase spending and boost the economy. By continuing to push long-term interest rates lower, the Fed's actions will encourage investors to put money into assets like stocks and commodities.
But such asset purchases would also put more dollars into circulation, causing the greenback's value to decline against other major currencies. The dollar rose to 82.06 yen from 81.80 yen, but still hovered around a 15-year low. The euro gained slightly, to $1.3952 from $1.3944.
Benchmark oil for November delivery was up 27 cents to $82.93 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 99 cents to settle at $82.66 on Friday.