World markets buoyed by banks despite Greek fears

[February 16, 2010]  LONDON (AP) -- World stock markets mostly rose Tuesday after strong earnings from British bank Barclays PLC and ahead of Wall Street's open following a public holiday in the U.S.

However, investors, particularly in Europe, remained wary about the Greek debt crisis and the associated response from the European Union.

In Europe, the FTSE 100 index of leading British shares led the way, rising 45.18 points, or 0.9 percent, to 5,212.65. Barclays spiked 6 percent after it reported a fourth quarter profit of 6.9 billion pounds ($10.8 billion), more than eight times larger than a year earlier, largely because of the sale of one of its businesses.

Royal Bank of Scotland Group PLC, which is over 80 percent owned by the British government, and Lloyds Banking Group PLC, which is 41 percent state-owned, both advanced in Barclays' slipstream.

Deutsche Bank AG and Credit Agricole SA also enjoyed solid gains, helping Germany's DAX to rise 43.89 points, or 0.8 percent, to 5,554.99 and the CAC-40 in France to advance 23.58 points, or 0.7 percent, to 3,632.80.

Despite the advance in Europe, trading was somewhat subdued as investors awaited Wall Street to reopen following Monday's Presidents Day holiday.

"Quiet markets are ones where the 'fear factor' inevitably eases off, so it's no great surprise we find equity indices, commodities and even the euro all a little stronger this morning," said Kit Juckes, chief economist at ECU Group.

Fear related to a possible Greek debt default has been the key driver in markets over the last couple of weeks.

That fear has not gone away as the finance ministers of the eurozone told Greece Monday that it has until March 16 to prove its commitment to reducing its deficit or new measures beyond what is already planned will have to be enacted. The wider meeting of the 27 EU finance ministers later is expected to rubber-stamp the eurozone approach.

The spread between Greek and German ten-year government bond yields has widened since Monday's close from around 3.05 percentage points to a high of 3.33 percent earlier Tuesday before narrowing slightly to 3.26 percent -- the bigger the spread, the greater the markets' fear.

Despite the modest narrowing during European morning trading, the spread remains on an upward trajectory, suggesting that tensions linger and investors remain skeptical at best that the Greek government can pull off its austerity plan.

Greece has promised to reduce its budget gap from 12.7 percent of gross domestic product to 8.7 percent this year as it attempts to dampen down on market fears that it could eventually default on its debt and/or require a bailout from the 16 countries that use the euro.

That skepticism was evident in the performance of Greek stocks Tuesday as investors returned from their holiday, still unsure about how the crisis will pan out over the coming weeks and whether more austerity would be on the cards. The Athens composite index was down 2.1 percent at 1,858.70.

Despite ongoing Greek debt concerns, the euro has managed to win some respite Tuesday, rising 0.4 percent to $1.3647 by late-morning London time.

"It seems now that any euro bounce from here will not be driven by some magically detailed rescue plan," said Daragh Maher, deputy head of global foreign exchange strategy at Calyon Credit Agricole.

"Instead, the markets will want to become more confident that Greece will be able to deliver the difficult fiscal tightening expected of it, and that other eurozone nations will be sufficiently supportive of its efforts to remind markets that help can be provided if required," he added.

Earlier Asian markets ended modestly higher though trading levels were extremely low what with holidays in Shanghai, Hong Kong, Taiwan, Singapore and Malaysia.

Japan's Nikkei 225 stock average rose 20.95 points, or 0.2 percent, to 10,034.25 and South Korea's Kospi gained 7.39, or 0.5 percent, to 1,601.05.

Australia's benchmark climbed 0.5 percent while Indonesia's market jumped 0.8 percent and New Zealand's stock index advanced 0.9 percent.

Oil prices rose above $75 a barrel with benchmark crude for March delivery up 94 cents at $75.07 in electronic trading on the New York Mercantile Exchange. With markets closed Monday in the U.S., the contract last settled on Friday, falling $1.15 to $74.13.

[Associated Press; By PAN PYLAS]

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