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World stocks rise on Europe debt plan hopes

Wed, 10/19/2011 - 12:45am
PAMELA SAMPSON - AP Business Writer - Associated Press

World stock markets rose Wednesday, with investors emboldened by reports that Germany and France were moving closer toward resolving Europe's debt crisis through a massive expansion of the region's bailout fund.

Oil prices hovered above $88 per barrel, while the dollar was lower against the euro but edged up against the yen.

European shares rose in early trading. Britain's FTSE 200 was 0.4 percent higher at 5,707.19. Germany's DAX gained 0.8 percent to 5,925.43 and France's CAC-40 added 0.7 percent to 3,162.89.

But Wall Street, coming off a strong rally the previous day, appeared to be headed lower. Dow Jones industrial futures fell 0.5 percent to 11,465 and broader S&P 500 futures shed 0.7 percent to 1,215.10.

Asian shares were mostly higher after taking a beating on Monday. Japan's Nikkei 225 index rose 0.4 percent to 8,772.54 and Hong Kong's Hang Seng added 1.3 percent to 18,309.22. South Korea's Kospi gained 0.9 percent to 1,855.92.

Benchmarks in Australia, India and Indonesia were higher. Those in Singapore, Taiwan, Malaysia and Thailand fell.

The Guardian newspaper reported that France and Germany have agreed to expand the rescue fund for nations using the euro common currency to euros 2 trillion ($2.74 trillion). The paper cited unnamed European diplomats and said European officials are expected to take up the expansion along with a package of other measures at a meeting this weekend.

Wall Street rose sharply Tuesday on the news. The Dow Jones industrial average rose 1.6 percent to close at 11,577.05. The S&P 500 index rose 2 percent to 1,225.38. The Nasdaq composite rose 1.6 percent to 2,657.43.

Gains in Asia were muted, however, since investors may want to see more consistent gains before wading deeply back into the market, analysts said.

"Following recent volatility, it is unlikely that we will see quite as big a rally locally as our U.S. peers today. Particularly at the retail end of the market, investors will probably wait to see successive gains before rushing back into the market," Stan Shamu of IG Markets in Melbourne said in a research note.

Mainland China's Shanghai Composite Index fell 0.3 percent to 2,377.51. That comes on top of a 2.3 percent loss Tuesday, when data showed China's economic growth eased last quarter to 9.1 percent. The smaller Shenzhen Composite Index lost 0.6 percent to 1,004.20.

Hong Kong-based analyst Francis Lun cautioned investors not to overreact to data about China's economy, which is still enjoying steady growth.

"Don't worry about China," Lun said. "I think even a 9.1 percent growth is not the end of the world. I think people just overplayed the slowdown." The overwhelming concern for markets is Europe and fears of a messy debt default by Greece, he said.

The Greek government is widely expected to go through some kind of default or restructuring of its debt. If that process becomes disorderly, European banks could suffer big losses on Greek government bonds and that could spread overseas, jolting global credit markets. That could escalate into another financial crisis similar to the one that occurred in 2008 after the collapse of Lehman Brothers.

Hopes for a solution to the European crisis sent banking shares higher. National Australia Bank Ltd. rose 1.5 percent, Japan's Mitsubishi UFJ Financial Group rose 0.9 percent, and Hong Kong-listed Bank of China Ltd. gained 2.3 percent.

Japan's export shares slid amid a stubbornly strong yen, which makes domestically manufactured products more expensive overseas. Sony Corp. was down 1.2 percent and Toshiba Corp. lost 2.4 percent.

Camera and precision instruments maker Olympus Corp. fell 2 percent, continuing its retreat in the aftermath of the firing of CEO Michael Woodford, whom media reports said was dismissed after challenging Olympus executives about questionable corporate governance practices and several acquisitions.

Benchmark crude for November delivery was up 7 cents at $88.41 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.96 to settle at $88.34 in New York on Tuesday.

In currencies, the euro rose to $1.3806 from $1.3747 late Tuesday in New York. The dollar rose to 76.78 yen from 76.76 yen.

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