US stocks rebound but it's looking gloomy in Japan

US stocks surged yesterday on renewed hopes for the bailout plan. Bloomberg reports:

U.S. stocks jumped the most in six years as growing expectations that lawmakers will salvage a $700 billion bank-rescue package helped the Standard & Poor's 500 Index recover more than half of yesterday's 8.8 percent plunge...

The S&P 500 rose 58.35 points, or 5.3 percent, to 1,164.74, its biggest rally since July 2002. The Dow Jones Industrial Average jumped 485.21, or 4.7 percent, to 10,850.66 and earlier gained more than 500 points. The Nasdaq Composite Index added 5 percent to 2,082.33. More than five stocks climbed for each that fell on the New York Stock Exchange.

On the whole, economic data, although not the focus for investors, also didn't hinder the recovery too much.

Consumer confidence unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks. The Conference Board's confidence index rose to 59.8, a third consecutive increase, from 58.5 the prior month. A separate report showed home prices fell in July at the fastest pace on record from a year earlier.

A measure of U.S. business activity slowed for the first time in seven months as new orders and inventories weakened. The National Association of Purchasing Management-Chicago said its business index decreased to 56.7 this month from 57.9 in August. Fifty is the dividing line between growth and contraction.

But the credit crisis is certainly not over.

The London interbank offered rate, or Libor, that banks charge each other for overnight loans jumped 431 basis points to an all-time high of 6.88 percent, the British Bankers' Association said today.

Meanwhile, the economic reports coming out of Japan have been pretty gloomy. From AFP/CNA:

Japan's unemployment rate rose to 4.2 per cent in August from 4.0 per cent in July with only 86 jobs on offer for every 100 job seekers, the lowest since September 2004, official figures showed...

Separate government data showed industrial production dropped by 3.5 per cent in August from the previous month, the steepest fall since comparable records began in 2003...

Official figures said household spending tumbled by 4.0 per cent in August from a year earlier, a much bigger drop than an expected decline of about 1.4 per cent.

Other reports corroborate the weakness in manufacturing. From Reuters on Monday:

Manufacturing activity in Japan fell to its lowest point in 6-½ years in September as companies recoil amid an uncertain economic outlook and financial market turmoil...

The PMI declined to a seasonally adjusted 44.3 in September from 46.9 in August, pushing it further below the 50-point mark that points to a contraction in manufacturing.

And from Bloomberg today.

Japan's largest manufacturers turned pessimistic about the prospects for business for the first time in five-years as a deepening U.S. financial crisis stifled demand in the country's export markets.

The Tankan index of confidence among big makers of cars and electronics slid to minus 3 points in September from 5 in June, a fourth quarterly drop, the Bank of Japan said today in Tokyo. The first negative reading for the index since 2003 indicates pessimists outnumber optimists.