Asian markets rally after European bank decision to support

A decision by European central banks to support the region's financial system helped calm Asian markets, setting off a rally in early Friday trading.

The focus is now shifting to talks in Poland between US Treasury Secretary Timothy Geithner and his European counterparts, which will run through Saturday, about coordinating efforts to prevent Europe's debt crisis from derailing a global recovery.

Japan's Nikkei 225 index rose 1.7 per cent to 8,819.69 while South Korea's Kospi advanced 3.5 per cent to 1,835.31. Hong Kong's Hang Seng gained 2.1 per cent to 19,585.10.

The news also set off a rally in US stocks overnight, with the Dow Jones industrial average rose 1.7 per cent to close at 11,433.18. The Standard & Poor's 500 index climbed 1.7 per cent to 1,209.11.

Worries about European banks' borrowing problems, a key element in the region's debt crisis, have been hanging over global markets in recent weeks, especially about the cash-strapped governments in Greece and Italy.

But the European Central Bank, the US Federal Reserve and three other central banks said on Thursday they would provide European banks with unlimited dollar loans.

In currencies, the dollar strengthened to 76.78 yen from 76.64 Japanese late in New York on Thursday. The euro fell to $1.3866 from $1.3889.

Benchmark oil for October delivery was up 1 cent at $89.41 per barrel in electronic trading on the New York Mercantile Exchange. The contract added 49 cents to finish on Thursday at $89.40 per barrel.

In London, Brent crude for October delivery was up 40 cents at $112.70 on the ICE Futures exchange.