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World Stocks Soar

Shares jump in Asia after the Bank of Japan holds rates steady.
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World stocks soared Thursday, paced by the Bank of Japan's decision to hold rates steady.

The gains came as markets hit a record high in China. Also boosting sentiment were

Bank of America's

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$2 billion investment in

Countrywide

(CFC)

and the decision by

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Citi

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and other big banks to tap the Fed's discount window.

Shares rose sharply in Asia after Japan's central bank maintained its short-term interest rate target at 0.5%. The bank had indicated last month it intended to raise that rate by a quarter-point after the Japanese economy turned in a solid first-half performance, in a bid to close the gap between Japan's low rates and the higher ones in other developed economies.

But in recent weeks the Fed, the European Central Bank and the Bank of Japan have all been flooding their money markets with cash in a bid to stave off a financial crisis stemming from lax underwriting standards in the U.S. Loans made to homebuyers with poor credit histories have been going bad in droves, and the resulting pain has spanned the globe because Wall Street managed to sell the loans as securities to buyers around the world. Dozens of mortgage lenders have gone belly-up stateside, and a bailout had to be organized for a state-run bank in Germany after it turned out it had heavy exposure to hard-to-value mortgage securities.

The mortgage problems have scared investors away from lower-quality debt and sent stock markets broadly lower in recent weeks. The Bank of Japan may also have been loath to raise rates right now because the yen has been strengthening against other major currencies -- a trend that hurts Japan's export-driven economy.

On Thursday, Japan's Nikkei rose 2.6% and Hong Kong's Hang Seng rose 2.8%. China's Shanghai Composite tacked on 1%, making its first-ever close above 5000.

In Europe, the major markets in the U.K., France and Germany were all up around 1%.