Stocks up on Obama's promise to spur economy

[January 26, 2011]  LONDON (AP) -- Stock markets rose Wednesday on President Barack Obama's vow to create jobs and spur growth, and on the easing in tensions over Europe's debt crisis.

Investors welcomed Obama's annual State of the Union speech, particularly his proposal to cut corporate taxes and boost spending for education, innovation and infrastructure in the world's largest economy.

The promises helped buoy stock indexes ahead of a monetary policy announcement by the Federal Reserve. The Fed is not expected to alter its current monetary stance, with the main interest rate at the record low of near zero percent and the central bank in the middle of a $600 billion injection of newly created money into the U.S. economy.

However, investors will be looking for any noticeable change in views on the rate-setting Federal Open Market Committee.

In Europe, sentiment was on the rise after another successful bond auction by Spain, which calmed worries that it could run into funding problems, and high demand for the European bailout facility's first round of fundraising.

That has helped sustain the euro's rally past two-month highs, to $1.3706 on Wednesday from $1.3675 the previous evening. Analysts warn, however, that the 17-nation shared currency is unlikely to be able to rise much further.

Adam Myers, an analyst at Credit Agricole CIB, notes that the euro's rise has been driven largely by expectations that European interest rates will rise earlier than in the U.S., a notion that is shaky as long as the crisis over too much government debt in Ireland, Greece and several other countries still festers. Economic indicators out of the U.S., meanwhile, continue to improve.

In stock markets, Britain's FTSE 100 was up 1.3 percent at 5,994.32, recovering from the previous day's slide, triggered by data showing the U.K. economic recovery ground to a halt in the fourth quarter.

Germany's DAX was 1.3 percent higher at 7,148.21, with software maker SAP AG down barely 0.1 percent after revealing a 36 percent drop in fourth quarter net profit due to an expensive legal battle with rival Oracle.

France's CAC-40 index was up 0.9 percent to 4,055.94.

Wall Street was also headed higher, with Dow futures rising 0.3 percent to 11,956 and S&P 500 futures up 0.4 percent to 1,292.60.

Before traders fix their attention on the Fed, they will have a slew of U.S. corporate earnings reports to sift through -- from companies including Boeing Co., General Dynamics Corp., Starbucks Corp., Xerox Corp. and United Technologies Corp.

In Asia, concerns still largely revolved around the possibility that China would soon take more aggressive steps to cool its galloping economy and tamp down inflation.

Japan's Nikkei 225 stock average closed down 0.6 percent at 10,401.90. Indexes in New Zealand and the Philippines were also down.

Hong Kong's Hang Seng gained 0.2 percent to 23,842.24 while South Korea's Kospi index rose 1.1 percent to 2,110.46 on news the country's economy grew at its fastest pace in eight years in 2010 even though the expansion slowed in the final quarter. Gross domestic product advanced 6.1 percent last year, marking the best performance since a 7.2 percent surge in 2002.

China's Shanghai Composite index climbed 1.2 percent to 2,708.81. The Shenzhen Composite Index for China's smaller, second market added 1.6 percent to 1,154.42. Markets in Singapore, Taiwan and Indonesia also rose. Australia's stock market was closed for a public holiday.

The dollar hovered around 82.10 yen.

Benchmark crude for March delivery was up 43 cents at $86.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.68 to settle at $86.19 on Tuesday.

[Associated Press; By CARLO PIOVANO]

Pamela Sampson in Bangkok contributed to this report.

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