US STOCKS-Higher open seen on China boost to world demand

Mon Nov 10, 2008 9:23am EST

* China stimulus plan seen sparking demand

* AIG rises on news of government investment

* GM slides after brokerage recommends sell (Recasts first paragraph, updates prices)

By Ellis Mnyandu

NEW YORK, Nov 10 (Reuters) - U.S. stocks headed for a higher open on Monday, with big exporters including General Electric (GE.N) , set to lead gains following China's plan of a multibillion economic stimulus to shore up the world's fourth largest economy.

GE shares jumped 3 percent to $19.40 before the bell after China approved on Sunday $586 billion in new government spending between now and 2010, focused largely on infrastructure and social projects. For details, see [ID:nN09395080].

In another boost to sentiment, shares of American International Group (AIG.N) rose more than 40 percent to $3.03 before the bell after the U.S. Federal Reserve hiked its support for the insurer to about $150 billion after an initial bailout attempt failed to stem massive losses. [ID:nLA322782].

Equity markets around the world jumped as the prospect for recharged growth tempered fears about a deep global recession. Japan's Nikkei .225 rose nearly 6 percent overnight, and benchmark indexes in Europe were up 2 percent or more.

"Part of what we've been concerned about as we look at this global recession was what was China's response going to be," said Arthur Hogan, chief market analyst at Jefferies & Co in Boston. "We believe China is standing firmly behind their economy and that's going to help. The first move was the pop we saw in the price of oil."

S&P 500 futures SPc1 rose 13.10 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 climbed 104 points, and Nasdaq 100 NDc1 gained 13.50 points.

Any stabilization in Chinese demand could be a boon for big U.S. manufacturers and exporters, including Caterpillar Inc (CAT.N) , Boeing Co (BA.N) and GE, as they grapple with a deepening economic downturn at home. All three are constituents of the Dow.

The Fed said the new measures would help AIG establish a more durable capital structure, resolve liquidity issues and , facilitate its plans to sell certain businesses in an orderly manner that promote market stability. They will also protect the interests of the U.S. government and taxpayers.

But shares of General Motors (GM.N) declined 11.7 percent to $3.86 before the bell after Deutsche Bank cut the auto maker to "sell" from "hold." According to theyflyonthewall.com, the brokerage also slapped the stock with a zero price target. (Editing by Kenneth Barry)

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