Confidence in world recovery boosts stock markets

[July 09, 2010]  LONDON (AP) -- World stock markets rose Friday on hopes that global economic growth will prove resilient, with investors viewing a surprise interest rate hike in South Korea as a sign of confidence in the recovery.

After a fall in U.S. unemployment benefit claims the previous day, the Bank of Korea raised its benchmark interest rate from a record low -- following rate hikes by Taiwan, India and Malaysia in the last two weeks -- amid prospects for faster economic growth.

Along with some cautiously upbeat comments from the European Central Bank the day before, traders were encouraged by the news and bid up on stocks.

After broad gains across Asia, Germany's DAX was 0.3 percent higher at 6,054.87 and Britain's FTSE 100 was up 0.1 percent at 5,109.06. France's CAC-40 was 0.5 percent higher at 3.554.90.

Wall Street, however, was expected to dip after robust gains earlier this week -- Dow futures were 0.2 percent lower at 10,075 and Standard & Poor's 500 futures were down 0.1 percent at 1,065.50.

"The rate hikes are a loud vote of confidence from Asia's central banks that growth will continue, despite weakness in Europe," DBS bank said in a report.

European stocks have also been helped by speculation that the results from stress tests on banks, to be published later this month, will show the financial sector is in better health than some feared.

ECB President Jean-Claude Trichet on Thursday welcomed the tests as a positive measure and dismissed suggestions that the outcome could add to Europe's ongoing debt crisis by revealing new problems. He also sounded an upbeat note on the 16-nation euro zone's economy and indicated that interest rates would remain at record lows for the time being.

Meanwhile, the Chinese central bank said monetary and fiscal policy will likewise remain accommodative in the second half of the year, assuaging some investors' fears that authorities there were ready to tighten controls on the market to cool off the economy.

The cautiously upbeat tones from Asia and Europe were also helped by a U.S. report showing a larger than expected drop in the number of newly laid-off people seeking unemployment benefits.

By the close in Asia, the Shanghai Composite Index jumped 2.3 percent to 2,470.92 and Japan's Nikkei 225 stock average rose 0.5 percent to 9,585.32 with exporters advancing on a weaker yen.

South Korea's Kospi advanced 1.4 percent to 1,723.01 after the interest rate decision. Hong Kong's Hang Seng was up 1.6 percent and Australia's stock benchmark gained 0.9 percent.

Markets in Singapore, Taiwan, India, Thailand, Indonesia and Malaysia also rose.

In currencies, the dollar rose to 88.46 yen from 88.38 yen in New York late Thursday. The euro dipped to $1.2671 from $1.2697 after trading above $1.27 for the first time in two months.

Benchmark crude for August delivery was up 22 cents at $75.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.37 to settle at $75.44 a barrel on Thursday.

[Associated Press; By CARLO PIOVANO]

Associated Press writer Alex Kennedy in Singapore and researcher Bonnie Cao in Beijing contributed to this story.

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