World markets look to Europe debt crisis summit

[December 16, 2010]  LONDON (AP) -- World stock markets were mixed Thursday ahead of an EU summit where national leaders will tackle the region's debt crisis and as investors hoped for more upbeat U.S. economic indicators.

Traders were looking to the EU meeting for some broader response to the market turmoil that has led to bailouts for Greece and Ireland and threatens to trigger more. Analysts, however, warned there would likely be no shock-and-awe tactics such as making yet more money available to backstop troubled governments.

Britain's FTSE 100 was up 0.4 percent at 5,903.09 and Germany's DAX was 0.1 percent higher at 7,024.26. France's CAC-40 gained 0.3 percent to 3,893.47.

Asian markets were mixed but Wall Street was expected to dip on the open -- Dow futures were down 0.1 percent at 11,403 and the Standard & Poor's futures were 0.1 percent lower at 1,231.

The EU summit is expected to yield no new major solutions to the debt crisis but will likely focus on a crisis resolution mechanism to be adopted from 2013, when the current $1 trillion bailout fund expires.

Germany and France have rejected the notion of creating European bonds linking debt markets across the region and refuse to refuel the bailout fund now. Rather, they will seek consensus to create new rules that will force losses on investors in case of future bailouts. That would push debt-laden countries to clean up their finances and protect taxpayers in richer countries from footing the bill for expensive rescue efforts.

"Today's commencement of the two day EU summit is likely to be the focus for investors' attention," said Daragh Maher, analyst at Credit Agricole CIB.

A Spanish sale of euro3 billion ($4 billion) in 10- and 15-year bonds showed traders remain cautious about the country's finances a day after ratings agency Moody's warned it is considering downgrading its debt. The interest rates rose on both bond issues, denoting extra market caution to lending to Spain, though both auctions were oversubscribed.

"The auction result has been disappointing in terms of funding costs but largely in line with market expectations," said UniCredit analysts in a note.

Spain is one of the largest but weakest economies in the eurozone, and its rescue would strain the EU's bailout funds.

Beyond Europe's debt gloom, economic data out of the U.S. has been largely buoyant. Weekly jobless claims and housing start figures due later in the day will be watched for a continuation of this trend. U.S. consumer spending accounts for a fifth of global economic activity, making its recovery particularly important during the crucial pre-holiday shopping season.

In corporate news, BP shares were down 2.8 percent after the U.S. government announced it was suing the oil company over its handling of the disastrous Gulf of Mexico oil spill. The company, which is selling off assets to pay for the cost of the spill, said it would respond to the claims at a later date.

In Asia, Japan's Nikkei 225 stock average edged up less than 0.1 percent to close at 10,311.29 as a weaker yen lifted some exporters.

Australia's S&P/ASX 200 added 0.3 percent to end at 4,784.00. Taiwan's benchmark also rose.

The Shanghai Composite index dipped 0.5 percent to 2,898.14 while Hong Kong's Hang Seng was down 1.3 percent to finish at 22,668.78. South Korea's Kospi lost 0.4 percent to 2,009.24. Benchmarks in Singapore and India also fell.

In currencies, the dollar climbed above the 84-yen line and was trading at 84.06 yen from 84.27 yen late Wednesday in New York. The euro rose to $1.3225 from $1.3221.

Benchmark crude for January delivery was down 6 cents at $88.56 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 34 cents to settle at $88.62 on Wednesday.

[Associated Press; By CARLO PIOVANO]

Kelvin Chan in Hong Kong contributed to this report.

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