World stocks, euro up on hopes of ECB action

[December 02, 2010]  LONDON (AP) -- World stock markets and the euro climbed Thursday on hopes the European Central Bank will boost its efforts to support the 16-nation eurozone economy, which has been rocked by fears the debt crisis will force new bailouts.

Improved signs of recovery out of the U.S. had jump-started the advance late the day before on Wall Street and with so much hanging on the ECB's statements, investors rode the momentum.

Germany's DAX was up 0.4 percent at 6,895.04 and Britain's FTSE 100 added 0.7 percent to 5,682.49. France's CAC 40 rose 0.7 percent to 3,696.09.

Asian indexes closed higher and Wall Street was set to rise again on the open -- Dow futures were up 0.3 percent at 11,268 while Standard & Poor's 500 futures were 0.4 percent higher at 1,209.40.

Markets expect the ECB to increase its purchases of government bonds, particularly those in weaker economies like Portugal, Spain and Italy, to lower bond yields and ease pressure on those countries. Ireland's bailout, which followed Greece's in May, failed to calm fears that these countries are in a downward spiral of low growth and rising debt costs.

The fear is that if the ECB does not step up its support measures -- which some on the central bank's governing council had until recent weeks sought to wind down -- investor sentiment in so-called 'peripheral' countries could deteriorate sharply Friday and eventually require more rescue efforts.

All eyes will be on ECB President Jean-Claude Trichet, who will hold a news conference at 1330 GMT.

"The market is poised and expectant of getting something of value from the ECB in today's press conference," analysts from Credit Agricole CIB wrote in a note to investors. "Trotting out the usual statements simply will not do."

European markets were granted a day of respite on Wednesday, when a successful Portuguese bill sale helped lower yields. But the fear is that beyond Portugal, much larger countries like Spain, Belgium or Italy could become ensnared in the turmoil and see their borrowing costs jump higher still.

"Yesterday's rally in peripherals and the euro can easily be undone many times over if the ECB disappoints," the Credit Agricole analysts warned.

The eurozone currency was up again on Thursday, along with market sentiment, to trade at $1.3183 from $1.3115 late the day before.

Besides the ECB, eyes will also be on a 3-year bond sale in Spain, where the government this week announced new measures to cut debt and boost growth. The bond sale is expected to be fully subscribed, though the coupon is likely to be high, reflecting the market jitters.

The main boost to investor sentiment the day before had come from upbeat jobs data out of the U.S. ADP Employer Services, a payroll company, said small businesses added the largest amount of workers in three years last month, well ahead of what analysts had forecast. Improved economic growth in the U.S., the world's No. 1 economy, would be a boon for export-reliant countries in Europe and Asia.

The Institute of Supply Management also said its index of manufacturing activity rose in November for the 16th month. The Federal Reserve then said the U.S. economy improved in 10 of the Fed's 12 regions.

In Asia, Japan's Nikkei 225 stock average surged 1.8 percent to close at 10,168.52, at one point hitting its highest intraday level in more than five months.

The dollar's climb over the 84-yen line bolstered Japanese exporters like automakers and electronics companies. Camera giant Canon Inc. rose 2.5 percent, and Sony Corp. rose 0.8 percent.

On Thursday, the dollar fell back to 83.97 yen from 84.09 yen late Wednesday.

Hong Kong's Hang Seng index climbed 0.9 percent to 23,448.78 and the Shanghai Composite index advanced 0.7 percent to 2,843.61. South Korea's Kospi rose 1.1 percent to 1,950.26.

Australia's S&P/ASX 200 jumped 2 percent to 4,676.20 as investors snapped up mining shares.

Missing out on the day's gains was Toyota Motor Corp., the world's biggest automaker, which saw U.S. auto sales drop 3 percent in November, while the industry overall posted a 17 percent climb compared with a year earlier. Toyota's shares fell 0.6 percent in Tokyo.

Benchmark oil for January delivery was down 15 cents at $86.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $2.64 to settle at $86.75 on Wednesday.

[Associated Press; By CARLO PIOVANO]

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