World stocks gain on hopes Europe debt woes easing

[June 28, 2011]  HONG KONG (AP) -- World stock markets edged higher Tuesday as investors welcomed signs that French banks could give Greece more breathing room on its debt, although worries about longer-term problems with the country's embattled economy still lingered.

The dollar weakened against the yen and euro while crude oil rose hovered around $91 a barrel.

News that French banks are planning to accept slower repayment of Greece's debt gave a lift to European shares in early trading. Britain's FTSE 100 rose 0.7 percent to 5,763.44 and Germany's DAX rose 0.4 percent to 7,138.38. In Paris, the CAC-40 rose 0.8 percent to 3,826.16.

Wall Street was set to open higher, with Dow Jones industrial futures rising 0.1 percent to 12,000 and S&P 500 futures up 0.1 percent to 1,277.50.

In Asia, Japan's Nikkei 225 climbed 0.7 percent to close at 9,648.98. But shares on South Korea's Kospi fell 0.4 percent to 2,062.91. Hong Kong's Hang Seng gained 0.3 percent to 22,114.23. Australia's S&P/ASX 200 closed 0.3 percent higher at 4,474.30.

Investors are concerned a Greek debt default could bring down other highly indebted neighboring countries and trigger a financial panic in Europe, similar to the credit crunch following the collapse of U.S. investment bank Lehman Brothers back in 2008.

French banks hold $21.3 billion in Greek government debt and the plan would give Greece more time to meet its other financial obligations. Lawmakers in Athens are set to start debating a new round of austerity reforms aimed at helping the country get additional rescue loans to avoid bankruptcy.

But many investors believe that even if Greece is able to get its financial act together, it still has to deal with rising unemployment and social unrest, problems that the reforms might exacerbate.

"It's a short-term fix for a long-term problem," said Samuel Le Cornu, a portfolio manager at Macquarie Funds Management.

"I think the broader audience is looking through real underlying structural problems and essentially they're saying this is going to take more than a one-off event."

Mainland Chinese shares rose, offsetting morning losses, as cement shares rallied on news of government plans for massive construction of public housing.

The Shanghai Composite Index edged up less than 0.1 percent higher to 2,759.20 after dipping nearly 1 percent earlier in the day. The Shenzhen Composite Index gained 0.3 percent to 1,152.00. Shares in cement and water conservancy contractors led the gains.

"I was surprised to see the gains today, despite reports that first-half financial results may be disappointing and the continued worries over higher inflation in June," said Yang Yining, an analyst at Capital-edge Investment & Management Co., Ltd, based in Shanghai.

Fujian Cement Inc gained 5.3 percent while Qianjiang Water Resources Development Co. Ltd gained 3.4 percent.

On Wall Street on Monday, the Dow Jones industrial average rose 108.98 points, or 0.9 percent, to close at 12,043.56. The Standard & Poor's 500 index rose 11.65, or 0.9 percent, to 1,280.10. The Nasdaq composite index rose 35.39, or 1.3 percent, to 2,688.28.

Benchmark oil for August delivery was up 42 cents to $91.03 in electronic trading on the New York Mercantile Exchange. The contract fell 55 cents to settle at $90.61 on Monday.

The euro rose to $1.4276 from $1.4266 late Monday in New York while the dollar fell to 80.82 Japanese yen from 80.97 yen.

[Associated Press; By KELVIN CHAN]

AP researcher Fu Ting in Shanghai contributed to this report.

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