World markets rise, wait for EU support to Greece

[February 11, 2010]  LONDON (AP) -- World markets rose Thursday on hopes that European leaders will rescue Greece from its crushing debt load and restore confidence in the eurozone's future.

Britain's main benchmark index, the FTSE 100, was up 1.2 percent at 5,191.42 while Germany's DAX rose 0.4 percent to 5,556.60. France's CAC-40 gained 0.8 percent to 3,664.42 and Greece's stock index also continued the week's rally, adding another 1.3 percent.

Asian markets closed higher overnight, helped by some upbeat regional data, and Wall Street was expected to rise on the open. Dow industrial average futures were up 35 points at 10,020.00 and Standard & Poor's 500 futures were up 5.3 points at 1,068.60.

The rally is driven by markets' belief that Europe's richest and most stable countries, namely Germany and France, will eventually have to support Greece, although the form of the rescue remains unclear.

"We suspect there are plans to offer Greece some form of conditional credit line as a safety net in the event it cannot fund itself in the capital markets," Credit Agricole analysts said in a note.

They cautioned, however, that because markets have been rising for days on speculation of a Greek bailout, investors risk being underwhelmed.

"Those expecting an announcement of money being thrown at Greece today may well be disappointed," they said.

Markets see Greece at risk of defaulting on its massive borrowings because it faces several years of sluggish growth and mounting debt that current austerity plans may not be able to stem. Greece's fiscal problems have shaken the 16-nation euro and underscored the interconnectedness of the global economy.

French government sources played down expectations of a concrete financial bailout.

A senior French official said the EU would offer "political support" and could follow up with more precise plans of real help at a later stage. The official, who spoke on condition of anonymity because of the sensitivity of the issue, did not elaborate.

"Here's the message: we are behind Greece," the official said. "I don't think (financial) aid needs to be extended to Greece."

"I think a message needs to be given to markets that we will know how to resolve the Greek question," he added.

The euro rose to $1.3791 from $1.3731 late Wednesday night in New York, while the dollar edged down to 89.86 yen from 89.91 yen.

Asian markets have this week largely followed the ebb and flow of confidence in the eurozone, but were also boosted overnight by upbeat regional economic figures.

New statistics out of Beijing showed a spike in inflation eased in January -- consumer prices climbed 1.5 percent over a year earlier, down from December's sharp 1.9 percent rise.

The decline suggests Beijing can put off taking drastic steps, such as a rate hike, that would have global repercussions if it slowed China's recovery and its demand for imported raw materials and consumer goods.

"The inflation data surprised us because it was a lot lower than the market expected," said economist Liu Qiyuan of China Merchant Securities.

The news helped send China's Shanghai index up 0.1 percent to 2,985.50, while Hong Kong's Hang Seng index jumped 1.9 percent to 20,290.69. Japanese financial markets were closed for a national holiday and will reopen Friday.

Analysts, however, warned against reading too much into the day's gains.

Linus Yip, a strategist at First Shanghai Securities in Hong Kong, said trading volume was extremely low, with many investors holding back ahead of the Lunar New Year holidays next week.

"People are sitting on the sidelines, and I don't think money is coming in," he said. "Once people come back from holiday, you will see real movements."

Hong Kong markets will be closed Monday and Tuesday, while markets in mainland China will be closed all week.

Strong jobs data drove Australia's benchmark up 0.9 percent to 4,554.3, while markets in Taiwan, Singapore and South Korea also posted gains.

In the U.S. on Wednesday, the Dow fell 0.2 percent to 10,038.38 a day after jumping 150 points on the Greece bailout hopes. Weighing down Wall Street were comments by Federal Reserve Chairman Ben Bernanke that outlined plans to dismantle the central bank's emergency supports for the U.S. economy.

The broader Standard & Poor's 500 index fell 0.2 percent to 1,068.13.

Oil prices rose in European trading, with benchmark crude for March delivery up 38 cents at $74.90 a barrel.

[Associated Press; By CARLO PIOVANO]

AP Business Writers Tomoko A. Hosaka in Tokyo and Joe McDonald in Beijing contributed to this report.

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