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Asian stocks rise after Europe deal on Greece debt

Wed, 10/26/2011 - 9:45pm
PAMELA SAMPSON - AP Business Writer - Associated Press

Asian stock markets climbed Thursday as investors waded into riskier assets, emboldened by European leaders agreeing on a plan to reduce Greece's massive debts.

Oil prices rose to near $92 per barrel while the euro gained strongly following the European summit dedicated to fixing a debt mess in Greece before it provokes a bigger crisis across the continent.

Japan's Nikkei 225 index rose 1.6 percent to 8,888.05 and South Korea's Kospi added 1.2 percent to 1,916.21.

Hong Kong's Hang Seng gained 1.7 percent to 19,399.03. Australia's S&P/ASX 200 jumped 2.5 percent to 4,348.20 after trading resumed following a 4-hour technical glitch.

Benchmarks in Taiwan, Singapore, mainland China, Indonesia and the Philippines also rose.

European leaders agreed early Thursday on a plan to provide Greece with more rescue loans to help relieve its crushing debt obligations. It will involve private investors taking bigger losses on the value of their Greek bonds, making Greece the first nation that uses the euro currency to be rated in default on its debt.

European Union President Herman Van Rompuy said the deal will reduce Greece's debt to 120 percent of its gross domestic product in 2020. Under current conditions, it would have grown to 180 percent.

In addition, the euro440 billion European Financial Stability Facility will be used to insure part of the losses on the debt of wobbly countries like Italy and Spain, rendering its firepower equivalent to around euro1 trillion.

Derek Cheung, chief investment officer at Neutron INV Partners Ltd. in Hong Kong, said he thought the plan was short on specifics and that the enthusiastic reception by investors was overblown.

"They only listen to the positive news," Cheung said. "I don't think it's a solution."

Another factor causing investors to gorge on shares, Cheung said, was speculation that China might relax its inflation-fighting measures that have drained liquidity out of the financial markets. That sent shares in property and railways bounding.

Hong Kong-listed shares of China Railway Group leaped 14.1 percent. China Railway Construction Corp. shot up 9.2 percent. Blue chip property company China Resources Land Ltd. soared 11.2 percent.

Strong earnings reports also propelled stocks higher.

Shares of Hong Kong-listed Agricultural Bank of China, one of the country's four major state-owned commercial lenders, added 4.8 percent after the Beijing-based bank announced its third-quarter profit rose 40 percent on growth in interest and fee income.

Anhui Conch Cement, China's largest cement producer by output, soared 7.1 percent, a day after announcing its net profit more than doubled in the third quarter of 2011.

Also Thursday, Japan's central bank said it had decided to buy Japanese government bonds, hoping to offset the strength of the yen. Electronics giants Sony Corp. gained 3.5 percent and Sharp Corp. rose 3.9 percent.

Shares of camera and medical equipment maker Olympus Corp. soared 23.6 percent, a day after Chairman and President Tsuyoshi Kikukawa announced he was stepping down amid intensifying scrutiny of the company after questions were raised over huge fees paid to financial advisers.

Meanwhile, strong economic reports helped send Wall Street higher on Wednesday.

The Dow Jones industrial average gained 1.4 percent to 11,869.04. The S&P 500 index rose 1.1 percent to 1,242. The Nasdaq composite added 0.5 percent to 2,650.67.

Reports in the U.S. showed businesses ordered more heavy machinery and other long-lasting manufactured goods last month. That indicates businesses are still spending on equipment despite worries about a weak economy and Europe's debt problems. Sales of new homes rose in September after falling for four straight months.

Benchmark crude for December delivery was up $1.66 at $91.86 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.97, or 3.2 percent, to end the day at $90.20 in New York on Wednesday.

Brent crude was up $1.15 at $110.06 a barrel on the ICE Futures Exchange in London.

In currencies, the euro climbed to $1.3993 from $1.3908 late Wednesday in New York. Since hitting $1.3172 on Oct. 4, the euro has risen sharply on hopes that the problems in Greece won't spread to other nations and cause a disastrous financial crisis. The dollar weakened to 75.99 yen from 76.20 yen.

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