World stocks up as Merkel calls for EU changes

[December 02, 2011]  LONDON (AP) -- Stocks rose Friday around the world as markets unnerved by the eurozone's debt crisis welcomed German Chancellor Angela Merkel's call for changes to EU treaties to enforce fiscal discipline.

In a closely scrutinized speech to Germany's parliament, Merkel said the 17 nations that use the euro currency must move quickly to restore market confidence, making financial controls stricter and more binding.

She reiterated her objection to so-called eurobonds -- debt jointly backed by eurozone countries -- and warned that the debt crisis will take years, not months, to fix. But her call for long-term changes suggested a commitment to strengthen financial union between countries in the euro, something analysts have said is necessary to make sure the eurozone doesn't break up.

Merkel and French President Nicolas Sarkozy are meeting Monday to discuss treaty changes that can restore confidence in the euro's future. The talks will culminate in a Dec. 9 summit of EU leaders, where the proposals are expected to be debated and detailed.

Investors are hoping if eurozone governments agree to longer-term changes in the way they control their finances, the European Central Bank will agree to step up its interventions in the bond markets. Those interventions keep borrowing rates down for debt-troubled nations like Italy.

Whether the ECB will agree to step up its bond purchases is not clear, although its President Mario Draghi hinted Thursday that it was a possibility.

"Expectations have been growing that a 'Grand Plan' will be delivered next week," said Frederik Ducrozet, analyst at Credit Agricole CIB.

European stocks rose, as did bonds for Italy and Spain. Britain's FTSE 100 gained 1.5 percent to 5,572.03 while Germany's DAX added 1.5 percent to 6,126.89. France's CAC-40 climbed 1.6 percent to 3,178.60.

Italy's 10-year bond yield continued to drop, to 6.48 percent, almost a full percentage lower than Wednesday, an indication investors have high hopes of next week's talks to save the euro. Spain's 10-year yield was down to 5.50 percent.

Wall Street also appeared headed for gains. Dow Jones industrial futures rose 1 percent to 12,126 and S&P 500 futures gained 1.1 percent to 1,257.80.

Investors will be eying monthly U.S. jobs data later in the day, with economists expecting an increase of about 125,000, while the unemployment rate is forecast to remain at 9 percent.

Weekly data released Thursday showed a rise in initial jobless claims applications to 402,000, the second weekly increase in a row. The figures didn't change expectations for the government's monthly labor report Friday.

Traders also got little encouragement from a better U.S. manufacturing report. The Institute for Supply Management said manufacturing grew last month at the fastest pace since June.

In Asia, Japan's Nikkei 225 index rose 0.5 percent to end at 8,643.75, its highest closing in three weeks. Hong Kong's Hang Seng rose 0.2 percent to 19,040.39. Australia's S&P/ASX 200 added 1.4 percent to 4,288.

South Korea's Kospi was marginally down at 1,916.04, and mainland Chinese shares also lost ground as investors cashed in on earlier gains. The benchmark Shanghai Composite Index lost 1 percent to 2,362.17. The smaller Shenzhen Composite Index lost 1.9 percent to 994.54.

Markets continued to enjoy some momentum from Wednesday, when the U.S. Federal Reserve, European Central Bank, Bank of England and the central banks of Canada, Japan and Switzerland jointly made it easier for banks to borrow dollars.

The coordinated effort was meant to prevent Europe's debt crisis from exploding into a global panic. Should a European bank fail or if a country default on its debt, investors fear it could result in a freeze-up in global lending like the one that occurred in 2008 when Lehman Brothers collapsed.

China's central bank also acted to release money for lending and to shore up growth by lowering bank reserve levels for the first time in three years. The bank actions caused global stocks to rally Thursday.

Benchmark oil for January delivery was up 56 cents to $100.76 per barrel in electronic trading on the New York Mercantile Exchange on Friday. The contract lost 16 cents to end at $100.20 per barrel on the Nymex on Thursday.

In currency trading, the euro rose to $1.3485 from $1.3460 late Thursday in New York. The dollar rose to 77.97 yen from 77.76 yen.

[Associated Press; By CARLO PIOVANO]

Pamela Sampson in Bangkok contributed to this report.

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