Global Markets Rally as Fears About Brazil Ease

Receding worries about Brazil’s economic problems touched off a global rally in stock markets Monday, after the troubled country’s central bank said it would continue to float its currency.

That may set a good tone today for Wall Street, which on Monday observed the Martin Luther King holiday.

Brazil’s own market gained 5.4% on Monday, building on Friday’s 33.4% rebound after the country’s authorities said they would no longer try to defend the currency’s value.

Other Latin American markets were mixed Monday, with Argentina’s main share index losing 2.3% after soaring more than 12% on Friday.

The Mexican market edged up 0.6% on Monday after a 7.8% rise Friday.

“There is still a lot of uncertainty out there,” said Michael Derks, senior market strategist for Nomura Securities in London.

But in Europe and Asia, investors appeared more trusting Monday that Brazil’s woes won’t lead to another round of financial turmoil worldwide.

Indonesia’s currency, which weakened last week as the Brazilian currency plunged, strengthened Monday, rising to 8,525 per U.S. dollar from 8,975 on Friday.

Likewise, the Thai currency, the baht, rose to 36.42 per dollar from 37.21 on Friday.

Among Asian stock markets, the Philippine market was the biggest gainer Monday, surging 4.4%. Singapore and Hong Kong were up 3.2% and 2.5%, respectively.

Thailand’s market rose 1.5%, while the South Korean market advanced 1.3%.

World equity markets were encouraged by Wall Street’s showing Friday, when the Dow Jones industrial average, after four days of losses, gained 2.4% after Brazil first moved to float its currency. The Dow closed Friday at 9,340.55, for a loss of 3.1% for the week.

Some of the strongest markets on Monday were in Europe. The Spanish market, for example, leaped 5% after falling 7.8% last week. Shares were boosted by news of a major bank merger.

In Sweden, the main OMX share index rose 3.2% on Monday, while the French market rose 2.4% and the British market was up 3.1%.

East European stocks also soared, with the Hungarian and Polish benchmark indexes recouping about half of last week’s losses on expectations that the countries will weather Brazil’s problems and that economic growth will stay strong.

Hungary’s benchmark BUX index rose 9.4%, its biggest one-day gain since Sept. 24; and Poland’s WIG index jumped 7%, the biggest one-day gain since Sept. 2. Last week, the indexes lost as much as 16%.

The weak spots in stock markets were China, where traders said prices could fall because of a growing number of companies warning of low profits, and Taiwan, where profit-taking followed two sessions of government-led stock fund purchases.

In currency trading, the dollar was little changed Monday against the yen and the euro.

The euro was quoted at $1.160, up from $1.159 on Friday; and the dollar was quoted at 114.35 yen, up from 114.13. Brazil’s real declined to 1.515 per dollar, down from 1.450 on Friday.

On Wall Street today, the merger announcement late Friday between AirTouch Communications and Britain’s Vodafone Group may push telephone shares higher.

Also, bank stocks, led by J.P. Morgan, may add to Friday’s gains on takeover speculation after two of Spain’s three biggest banks, Banco Santander and Banco Central Hispano, decided to merge.

“With money pouring into the markets, money managers are looking to an excuse to buy, and mergers are a good one,” said Trude Latimer, an independent market strategist based in Charlottesville, Va.

Meanwhile, BankAmerica, Merrill Lynch and other global U.S. banks and securities firms are expected to report fourth-quarter earnings today that show they’re still feeling the effects of last year’s emerging-markets plunge.

In the Internet sector, @Home, a high-speed Internet provider, is set to announce as early as today that it will acquire Excite, one of the top Web search engines, sources told MSNBC and the Wall Street Journal Web edition.