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Fannie, Freddie News Boosts Asian Markets

RENEE MONTAGNE, host:

NPR's business news starts with global market reaction to the Fannie-Freddie takeover.

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MONTAGNE: Investors around the world seem pleased about the U.S. government takeover of troubled mortgage companies Fannie Mae and Freddie Mac. European stock markets jumped more that three and a half percent after opening this morning. In Asia, most stock markets ended their trading day sharply higher. NPR's Louisa Lim reports from Shanghai.

LOUISA LIM: The bailout of Fannie Mae and Freddie Mac was good news for Asian markets. They surged the most in seven months. Across the region, most bourses were up. Hong Kong's Hang Seng closed 3.8 percent higher, and Japan's Nikkei closed up 3.4 percent.

Analysts say the government takeover removed the uncertainty stalking the markets and renewed investor confidence. Japan's finance minister, Bunmei Ibuki, predicts the bailout will be good for the global economy, making financial markets more stable. Indeed, some of the biggest movers were Japan's largest banks, which jumped by more than 10 percent.

But market watchers are warning today's recovery could just be a temporary blip, with more bad news likely further down the line.

China is the biggest foreign holder of debt issued by U.S. government agencies. As of mid last year, it had $376 billion of such debt, mostly in Fannie Mae and Freddie Mac. China's central bank governor, Zhou Xiaochuan, has praised the takeover as positive, but analysts here say the bailout will bring only short-term relief for China. Beijing is now in a bind due to the level of its exposure. Any sell-off could cause further turmoil in the markets. Shanghai's index bucked the trend by falling 2.8 percent, mostly on unrelated worries about China's own slowing growth.

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Louisa Lim, NPR News, Shanghai. Transcript provided by NPR, Copyright NPR.

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