Bargain-hunting lifts world markets

[July 06, 2010]  LONDON (AP) -- World markets rose Tuesday as investors scooped up stocks that had been pummeled last week and anticipated a rally on Wall Street when it opens after a long holiday weekend.

Weak data from major economies over the past few weeks has diminished confidence in a strong rebound from last year's global recession and unnerved markets, many of which are in the red so far this year. But after days of selling, some investors felt some stocks had become cheap, making it a ripe time to buy.

Britain's FTSE 100 index was 1.7 percent higher at 4,905.16 and Germany's DAX was up 1.6 percent at 5,909.57. France's CAC-40 gained 2.2 percent to 3,405.98.

Asian indexes closed higher and Wall Street was expected to rise on the open. After U.S. makers were closed on Monday for the long Independence Day weekend, Dow futures were 0.8 percent higher at 9,672 and Standard & Poor's 500 futures were up 0.9 percent at 1,023.30.

The increases are largely attributed to valuation -- investors consider many stocks cheap after sharp drops in recent weeks.

Analysts are quick to acknowledge that the fundamental outlook for the world economy is not any better than last week -- when U.S. jobs data proved disappointing and surveys showed global manufacturers are bracing for harder times and consumer spending is stuttering.

"This was merely a technical recovery, and we see no convincing evidence of any positive changes in economic fundamentals," said Zhang Gang, an analyst for Central China Securities in Shanghai.

With little in the way of indicators due on Tuesday -- a U.S. services sector survey is the only release of note -- many European traders will prepare for central bank policy announcements due Thursday. The European Central Bank and Bank of England are expected to leave their interest rates at historical lows. The ECB will be watched closely for comments on the outlook for economic growth, bank lending, and developments in markets amid the debt crisis.

The EU has promised to publish bank stress tests in a bid to convince markets that the financial sector is healthier than some fear. Those results could come on July 23, and what the ECB has to say about them could drive market sentiment either way.

In Asia, sentiment was helped somewhat on Tuesday by the Reserve Bank of Australia's statement on the prospects for the Australian economy, which are closely tied to Chinese demand for its ore and other minerals. Leaving interest rates unchanged after a series of hikes, the central bank said Australia's economic growth was on track and China's expansion was "starting to moderate to a more sustainable rate."

China led Asia's gains with the Shanghai Composite Index climbing off a 15-month low. The index jumped 45.48 points, or 1.9 percent, to 2,409.42.

Japan's Nikkei 225 stock index added 71.26, or 0.8 percent, to 9,338.04 and South Korea's Kospi advanced 0.6 percent at 1,684.94.

Elsewhere, Hong Kong's Hang Seng rose 1.2 percent to 20,084.10 and Australia's S&P/ASX 200 climbed 1.3 percent to 4,276.10.

Markets in Singapore, India, Taiwan, and Indonesia were also higher. Only benchmarks in Malaysia and Sri Lanka fell.

The dollar rose to 87.93 yen from 87.75 yen late Monday. The euro gained to $1.2583 from $1.2537.

Benchmark crude for August delivery was up 55 cents at $72.69 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By CARLO PIOVANO]

AP researcher Bonnie Cao in Beijing contributed to this report.

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