Global shares recover as questions increase

LONDON (AFP) - Stock markets rose further Friday on the growing view that fraud-linked billion-dollar losses at Societe Generale may have contributed to panic-selling earlier this week and bounced the US central bank into a radical rate cut.

Societe Generale (SocGen) said Thursday that a single rogue trader was responsible for losses of 4.9 billion euros (7.15 billion dollar), wiping out most of the bank's 2007 earnings.

Banking sources named the trader as Jerome Kerviel, 31, who had joined SocGen in 2000 and moved to the trading desk in 2005 where he it was claimed that he had covered up a whole series of unauthorised deals.

The bank said it discovered the problems on Saturday and Sunday, just prior to heavy falls on global equity markets, which some analysts believe may now have been caused by SocGen as it closed out the loss-making positions taken by the trader.

Markets were recovering Friday, building on Thursday's gains, as investors took some comfort in the idea that a one-off event at Societe Generale may have helped to exaggerate losses to share prices.

Stocks were also rebounding thanks to the US Federal Reserve decision to slash interest rates on Tuesday and following an agreement by the White House and Congress on a stimulus package aimed at warding off a recession.

"After taking a step back from the emotions, the markets are finding positives in the combination of the rescue package ... lower US rates and the likelihood that much of the apparent fear which started the rout on Monday was actually SocGen unwinding trades," said Martin Slaney, head of derivatives at GFT Global Markets

The Fed was expected to again cut rates at its regular two-day meeting starting Tuesday. US President George W. Bush was also sure to address economic issues in his annual State of the Union address on Monday, dealers said.

As a volatile week drew to a close, the rebound on European and Asian markets picked up steam Friday with gains ranging between 1.0 and 7.0 percent. Wall Street had enjoyed rises of more than 1.0 percent on Thursday.

Meanwhile gold and platinum prices reached historic highs Friday as investors rushed to invest once more in commodities as world stocks recovered. News of mine shut downs due to power shortages in South Africa also likely helped the metals.

Tokyo's benchmark Nikkei-225 index closed up more than four percent on Friday, extending gains for a third day, but it was still down 1.68 percent from a week ago and nearly 11 percent since the start of the year.

"The worst period appears to be ending for now. The mood of panic has been fading," said Toshikazu Horiuchi, an analyst at Cosmo Securities.

Hong Kong closed up 6.7 percent on Friday after slipping Thursday in the wake of Societe Generale's shock announcement.

But dealers rejoiced on seeing the limited fallout to European equities from the Societe Generale fraud case, one of the biggest in history.

"The Hong Kong market has been crazy. It tends to overreact to all news out there," said Jackson Wong, investment manager at Tanrich Securities.

In late morning trade Friday, London's FTSE 100 index of leading shares rose 1.12 percent to 5,941.70 points. Frankfurt's DAX 30 climbed 1.62 percent to 6,931.75 points and in Paris the CAC 40 rallied 1.20 percent to 4,974.39.

Europe's main stock markets had closed sharply higher on Thursday -- with gains of between 4.75 and 6.04 percent.

The White House and leaders in the House of Representatives, led by the rival Democratic party, reached a surprisingly quick deal Thursday aimed at shoring up the US economy wracked by housing sector turmoil.

The stimulus plan is pegged at around 150 billion dollars and will likely involve a mix of tax rebate checks and business incentives.

"The White House had earlier been expected to have a hard time in getting a Congressional accord but it came quickly," said Toshihiko Matsuno, who is in charge of market research at SMBC Friend Securities.

"But this is positive news only for now," he said. "Longer-term concerns over the US economy still linger."