European stocks edge up ahead of EU meeting

[March 25, 2010]  LONDON (AP) -- European stock markets edged up Thursday ahead of a key meeting of EU leaders in Brussels where the main topic once again will be what to do about the Greek debt crisis, which has piled pressure on the euro currency in recent days.

The FTSE 100 index of leading British shares was up 15.58 points, or 0.3 percent, at 5,693.46 while Germany's DAX rose 38.93 points, or 0.6 percent, at 6,077.93. The CAC-40 in France was 23.39 points, or 0.6 percent, at 3,973.20.

Wall Street was poised to recoup around half of Wednesday's losses at the open -- Dow futures were up 30 points, or 0.3 percent at 10,817 while the broader Standard & Poor's 500 futures rose 3.9 points, or 0.3 percent, to 1,168.50.

The main focus in the markets Thursday will be what, if anything, EU leaders decide regarding Greece and whether any financial support package that may emerge has any involvement from the International Monetary Fund.

The euro has been a big loser as the Greek debt crisis has dragged on -- the failure of the eurozone countries to come up with a support package for the country has exposed the institutional weaknesses behind the 11-year-old euro.

Analysts are hoping that something will emerge after months of uncertainty, even though German Chancellor Angela Merkel has been reluctant to stump up German cash to support Greece -- however Merkel does not want to see the euro continue to founder.

"If Germany's Merkel can be persuaded to fall into line with the rest of the EU leaders and agree to come to Greece's aid sooner rather than later, this should alleviate concerns over eurozone economies and ease pressure on global indices -- whether the German public will share in the upbeat mood is a different matter entirely," said Philip Gillett, sales trader at IG Index.

Expectations that something will likely emerge later was evident in the currency markets where the euro won some much-needed respite following its descent to a ten-month low of $1.3285 earlier.

By midmorning London time, the euro was 0.2 percent higher at $1.3341

Though a deal could shore up confidence in currency markets by eliminating uncertainty, investors are likely to be unsettled at any IMF involvement -- IMF help would be a glaring admission the eurozone cannot steer out of the crisis with the rules currently at its disposal.

In addition, Europe's debt problems are unlikely to go away -- earlier the People's Bank of China's vice governor Zhu Min said the Greek debt crisis was the "tip of the iceberg."

"This comment might well signal the point that we stop talking about a 'Greek debt crisis' and start talking about a eurozone structural crisis' instead," said Neil Mellor, currency strategist at Bank of New York Mellon.

"In other words, the issue is no longer about Greek profligacy per se -- in our opinion, it never has been -- but, rather, about how the eurozone actually functions," added Mellor.

The pessimistic comments out of China came after Fitch Ratings downgraded its view on Portugal's sovereign debt because it said the country's prospects for recovery were weaker than its peers in the eurozone. Though Portugal's debt rating was reduced by one notch to AA-, the country is still considered investment grade and a better bet than Greece for now.

Elsewhere, the British pound spiked higher after strong retail sales data fueled hopes that the economic recovery in the country was proving more buoyant than anticipated.

The office for National Statistics said retail sales in February rose by a monthly 2.1 percent, way more than the 0.8 percent consensus in the markets.

By midmorning London time, the pound was 0.6 percent higher at $1.4960.

Earlier in Asia, Hong Kong's Hang Seng index slid 230.07 points, or 1.1 percent to 20,778.55, with the broader market hurt after powerhouse Chinese trading firm Li & Fung's results disappointed investors. The company's shares dived over 9 percent.

Japan's benchmark Nikkei 225 stock average edged up 13.82, or 0.1 percent, to 10,828.85. Australia's main index was off 0.1 percent while South Korea's Kospi gained 0.4 percent to 1,688.39.

Benchmark crude for May delivery rose 21 cents to $80.82 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

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