LONDON, Dec 8: Global stock markets rebounded sharply on Monday on hopes of fresh government action to fight a deepening recession in the wake of massive job losses in the world’s biggest economy, dealers said.

There were signs on Monday that crisis-hit US carmakers may finally secure financial lifelines to avert an industry collapse.

In London, the leaders of Britain, France and the European Union were meanwhile on Monday set to hold a mini-summit on the world financial crisis.

In late morning trade, London was up 4.47 per cent, off initial gains of more than six per cent. Frankfurt gained 5.90 per cent, Paris soared 6.19 per cent, Madrid rallied 4.45 per cent and Zurich advanced 4.17 per cent.

Wall Street rebounded on Friday despite news that the US economy had lost more than half a million jobs in November, adding to concerns about the depth of a recession that is spreading worldwide.

“Job losses of this magnitude dismiss the notion this recession’s just another blip that will blow over soon,” said Jan Lambregts, head of Asia research at Rabobank International.

“They should also prove constructive ground for further policy action, both on the monetary and fiscal front,” he said, predicting another cut in US interest rates next week.

That helped Asian markets to start the week on an upbeat note. Tokyo closed up 5.20 per cent, Hong Kong soared 8.7 per cent, Seoul rallied 7.5 per cent and Sydney climbed 4.1 per cent.

“A few people are trying to bottom-pick” while hopes are growing that President-elect Barack Obama will take steps to revive the US economy, said Goldman Sachs JBWere senior trader Patrick Crabb.

“We may see a bit of a ‘bear’ market rally in December and a bit of Obama euphoria but the world’s still a very ugly place in the first half of 2009,” he added.

On Friday in New York, the Dow Jones Industrial Average gained 3.09 per cent, rebounding from early losses after news that the US economy lost 533,000 jobs in November and the unemployment rate hit a 15-year high of 6.7 per cent.

The grim report initially pushed US stocks lower on fears of a “deep and prolonged US recession,” noted NAB Capital strategist John Kyriakopoulos.

However, investors later had a change of heart “on hopes that government policy action and the sharp fall in the crude oil price will provide a cushion to the economy,” he added.

Markets were looking ahead to data due this week on the US retail sector, crucial to any recovery in the world’s largest economy, which has officially been in recession for about a year.

Investors were also waiting anxiously to see whether US lawmakers will agree to a bailout of the Big Three carmakers -- General Motors, Ford and Chrysler.

Democrats said on Sunday that a deal was imminent after a weekend of negotiations with the White House on a short-term loan package of about 15 billion dollars but Republicans warned of a tough debate ahead.

A business-savvy “car czar” could be named to oversee taxpayer-funded loans to General Motors, Ford and Chrysler, which employ millions of US workers.

“These plans will probably be ready to go by the time Obama takes office in January, highlighting the speed at which US authorities are responding to this crisis,” said economist Dermot O’Leary at Goodbody Stockbrokers.

Meanwhile, the 2008 winner of the Nobel economics prize, Paul Krugman, said lessons learned from the 1930s and from more recent economic crises could be the only thing warding off a new Great Depression.

“If we had not already experienced the Great Depression, I think we would be about to have another one,” the Princeton University professor told reporters in Stockholm where he will receive his Nobel prize this week.

“But the fact that we did have that Great Depression and have some economic analysis of how it happened, gives us some hope of avoiding a repeat,” he said.—AFP