World stocks post gains in wake of deficit pledges

[June 28, 2010]  MILAN (AP) -- European markets rose Monday, breaking a four-day run of losses, after the Group of 20 rich and developing nations vowed to reduce their deficits.

Leaders at the summit in Toronto this weekend endorsed a pledge by rich nations to slash budget deficits in half by 2013, while downplaying strategic differences on fiscal stimulus versus fiscal austerity.

"As expected, nothing earth-shattering from the G20 meeting in Toronto, but policymakers have done a rather elegant job at containing the underlying conflict on growth versus fiscal consolidation that had pitted in particular Germany against the U.S., but also split the euro zone down the middle," said Unicredit chief economist Marco Annunziata.

President Barack Obama had in recent weeks called on world leaders to avoid premature spending cuts to avoid hurting a fragile global economic recovery. However, Germany and many other European nations have made budget cuts a priority to avoid a repeat of Greece's near-bankruptcy and subsequent bailout.

Ben Potter, research analyst at IG Markets, called the progress on global deficit reduction "encouraging."

Britain's FTSE 100 stock index was up 0.46 percent at 5,069.65 while Germany's DAX was 0.9 percent higher at 6,125.12. France's CAC-40 was up 0.62 percent at 3,541.53.

In Asia, Hong Kong's Hang Seng index climbed 0.2 percent to 20,726.68 and benchmarks in South Korea, Taiwan, India, Indonesia and Singapore also posted mild gains.

Elsewhere, Japan's Nikkei 225 stock average fell 34.63 points, or 0.3 percent to 9,693.94 as a strong yen weakened exporters. The market also awaited key economic data this week on industrial production, unemployment, and the Bank of Japan's "tankan" survey of business sentiment.

Australia's S&P/ASX 200 lost 0.7 percent to 4,384.50 and the Shanghai Composite index shed 0.7 percent to 2,535.28 on concern this week's huge IPO by state-owned Agricultural Bank of China Ltd. might depress prices.

Before the weekend, U.S. bank stocks shot higher after an agreement on a financial regulation bill reassured investors that new rules won't devastate the profits of finance companies.

The response in Asia was more muted, with mixed performance by banks across the region. National Australia Bank Ltd. shed 1.1 percent, and Japan's Mizuho Financial Group Inc. lost 2.6 percent. South Korea's Woori Finance Holdings Co. advanced 1.7 percent.

The Dow Jones industrials ended down 0.1 percent at 10,143.81 Friday in New York, while the broader Standard & Poor's 500 index and the Nasdaq composite index both gained 0.3 percent.

In currencies, the dollar gained to 89.42 yen from 89.33 late Friday. The euro fell to $1.237 from $1.2371.

Benchmark crude for August delivery was down 27 cents at $78.58 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By COLLEEN BARRY]

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