Banks help European markets advance ahead of Fed

[December 16, 2009]  LONDON (AP) -- European stock markets rose Wednesday following a report that global finance regulators will give lenders a decade or more to meet stricter capital rules.

In Europe, the FTSE 100 index of leading British shares was up 33.19 points, or 0.6 percent, at 5,318.96 while Germany's DAX rose 72.11 points, or 1.2 percent, to 5,883.45. The CAC-40 in France was 34.40 points, or 0.9 percent, higher at 3,868.49.

Banks were in demand in Germany and France, in particular after the Nikkei financial daily reported that global banking regulators plan to delay new capital adequacy requirements for at least 10 years. The proposed requirements were regarded as particularly onerous for Japanese banks but Japan's Financial Services Agency said there was no agreement in place.

On the DAX, Commerzbank AG and Deutsche Bank AG were the biggest risers of the day while on the CAC-40 BNP Paribas SA and Societe Generale SA were prominent gainers.

However, the stock was kept in check ahead of what could potentially be a crucial statement from the U.S. Federal Reserve at the conclusion of its last rate-setting meeting of the year.

There are mounting expectations that the accompanying statement will be slightly more hawkish than before following a string of better than expected U.S. economic data, particularly related to jobs.

"Markets seem to be in limbo ahead of the Fed's announcement on rates later today," said Anthony Grech, market analyst at IG Index.

"Today seems as though it might set the tone for the final weeks of 2009 -- the Fed's announcement will be received in the context of a global economy that appears to be recovering, with traders well aware that low rates and cash lifelines cannot last forever," Grech added.

Wall Street was set to recoup some of Tuesday's losses -- Dow futures were up 48 points, or 0.5 percent, at 10,446 while the broader Standard & Poor's 500 futures rose 6.4 points, or 0.6 percent, to 1,110.30.

Investors are also fully aware that gains could well peter out as this is the last full trading week of 2009 and investors may use the opportunity to bolster their portfolios by locking in gains made over the last nine months.

After a big run since March, the markets have drifted this month. Many investors are unwilling to increase their bets toward the end of the year, with lingering uncertainty surrounding debt problems in Dubai and other governments only adding to their caution.

In a note to clients on Wednesday Hargreaves Lansdown Stockbrokers in London also warned investors to tread carefully on Friday, between 1010 GMT and 1030 GMT as the contracts for stock index futures, index options and equity options all expire on the same day.

"Between these times, we are expecting high levels of trading activity coupled with unpredictable price movements," said Richard Hunter, Head of UK equities at Hargreaves Lansdown.

"Our advice to clients is, if your order is not time critical, then consider holding off until later in the day when the market has stabilized. In addition, Friday's event could prove particularly volatile given recent investor concerns regarding sovereign debt levels," said Hunter.

Earlier, most markets in Asia fell, taking their lead from Wall Street Tuesday where investors fretted over the prospect of higher interest rates after a measure of U.S. inflation rose.

Hong Kong's Hang Seng shed 202.18, or 0.9 percent, to 21,611.74 and South Korea's Kospi fell 0.1 percent to 1,664.24.

Elsewhere, Australia's benchmark index lost 0.3 percent after figures showed the economy slowed in the third quarter as the boost from government stimulus spending faded. Taiwan's market dropped 0.7 percent.

China's Shanghai index slipped 0.6 percent as new share sales absorbed cash and sated buying appetite.

China including Hong Kong has outstripped the U.S. in the amount of money raised from stock listings so far this year at nearly $52 billion.

Japan's Nikkei 225 stock average bucked the trend as its financial sector was boosted by the report in the Nikkei financial daily. It closed 93.93 points, or 0.9 percent, higher at 10,177.41 -- its best finish since Oct. 27. Sumitomo Mitsui Financial Group Inc. soared 14 percent while rival Mizuho Financial Group Inc. led Nikkei vaulted 15 percent.

Oil prices hovered near $71 a barrel in Asia with gains tempered by a U.S. crude supply report that showed an unexpected increase in inventories last week.

Benchmark crude for January delivery was up 73 cents to $71.42 in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract added $1.18 to settle at $70.69.

In currencies, the dollar slipped 0.1 percent to 89.57 yen while the euro rose 0.2 percent to $1.4567.

[Associated Press; By PAN PYLAS]

Associated Press writer Tomoko A. Hosaka in Tokyo contributed to this report.

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