World stocks rally after Japan's Nikkei jumps 7.2 percent

HONG KONG (AP) — World stocks rallied today, led by a jump in Japan's main index, amid hopes for more stimulus from central banks in Europe and Japan.

Will Wall Street closed for Presidents Day, Japan's benchmark Nikkei 225 soared 7.2 percent to close at 16,022.58, rebounding from last week's slump to post its second biggest one-day gain in three years.

That led to big gains in Europe, where Britain's FTSE 100 closed 2 percent higher at 5,824.28 and Germany's DAX gained 2.7 percent to 9,206.84. France's CAC 40 rose 3 percent to close at 4,115.25.

Stocks began rallying after government data showed Japan's economy shrank 1.4 percent on an annualized basis last quarter because of weak consumer demand and slower exports.

It's a setback for Prime Minister Shinzo Abe's economic-revival program, which aims to stoke inflation through massive monetary easing. The report, however, also gives the government more reason to open the stimulus taps wider to restore growth, economists said.

"Together with the recent slump in the Nikkei and the appreciation of the yen, the case for additional easing remains compelling," said Marcel Thieliant of Capital Economics. He predicted the Bank of Japan will step up bond purchases and push interest rates that are already in negative territory even lower.