Markets rise on hopes for US growth, earnings

[January 10, 2012]  PARIS (AP) -- Stock markets shrugged off signs of a slowing Chinese economy on Tuesday, as investors hoped for strong corporate earnings from the U.S. and looked to a new round of talks in Berlin for progress in solving Europe's debt crisis.

The U.S. economy has shown new signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, signs that the U.S. labor market is improving has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.

Britain's FTSE 100 index of leading shares rose 1.0 percent to 5,668.89 and Germany's DAX rose 2.4 percent to 6,158. France's CAC-40 rose 2.1 percent to 3,194, while indices in Spain, Italy, Switzerland and elsewhere across Europe also recorded gains betwen 1 and 2 percent.

Ahead of the opening bell, Wall Street appeared set for a higher opening as well. Dow Jones industrial futures rose 0.5 percent to 12,402 and S&P 500 futures gained 0.6 percent to 1,283.10.

Moods were tempered by relatively gloomy indicators out of Europe.

The European Central Bank said Tuesday that the amount of overnight deposits that the region's banks held with it rose to euro481.93 billion ($613 billion) on Monday, breaking the record euro463.56 billion set only a day before.

The high deposits mean banks are keeping spare cash in a safe place even though they earn low interest. They also reflect large amounts of cash put into the banking system from ECB emergency loans of euro489 billion taken up by more than 500 banks in late December.

Dutch electronics giant Royal Philips Electronics NV kicked of corporate Europe's earnings season by warning that its fourth quarter profits were worse than expected due to a weak European market that made it difficult to charge customers as much as it wanted to for light bulbs.

"Our expected fourth quarter financial results have been affected by the weakness in Europe, which has impacted our health care business, as well as pricing in our consumer lighting business," said Chief Executive Frans van Houten in a statement.

Philips shares fell 6 percent to euro14.715 in early trading in Amsterdam.

On the day that international debt inspectors were returning to Athens, Greece successfully raised euro1.625 billion ($2.07 billion) in the sale of 26-week treasury bills, at a marginally lower interest rate than a similar auction last month.

Debt-crippled Greece relies on international rescue loans to keep solvent. Although unable to issue long-term debt due to incredibly high borrowing costs, it maintains a market presence through regular treasury bill auctions.

Greece's situation will be discusses at an "informal" meeting between Germany's Chancellor Angela Merkel and International Monetary Fund boss Christine Lagarde in Berlin Tuesday evening.

Ahead of that meeting, Fitch Ratings said a number of euro countries, including Italy, may see their credit ratings downgraded by one or two notches by the end of this month as they struggle to cope with the debt crisis.

Fitch's head of sovereign ratings David Riley says Tuesday the agency will give its verdict on several countries by the end of January. Fitch currently has Italy, Spain, Belgium, Ireland, Slovenia and Cyprus on so-called "ratings watch negative."

Much interest in the markets centers on Italy, which Riley says is the "front line" of Europe's debt crisis.

Overnight markets in Asia were marginally higher thanks to improving economic data out of the U.S., said Cameron Peacock of IG Markets in Melbourne.

The optimism was tempered by news that China's import growth decelerated sharply in December in a new sign the world's second-largest economy is slowing.

The customs agency said December imports rose 11.8 percent over a year ago, down from November's 22.1 percent gain. Exports rose 13.4 percent, down only marginally from the previous month's rate.

The country's politically sensitive global trade surplus widened to $16.5 billion.

Weaker Chinese demand for imports reflects a slowdown in rapid domestic economic growth after Beijing tightened lending and investment curbs to prevent overheating. A slump in global demand for Chinese goods has prompted the government to reverse course and promise measures to shore up growth.

Japan's Nikkei 225 index, reopening after a three-day holiday weekend, added 0.4 percent to close at 8,422.26. Hong Kong's Hang Seng index rose 0.7 percent to 19,004.28 while South Korea's Kospi jumped 1.5 percent to 1,853.22. Australia's S&P ASX 200 rose 1.1 percent at 4,152.20. Benchmarks in Singapore, Taiwan, and Indonesia also posted gains.

Benchmark crude for February delivery rose $1.46 to $102.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $101.31 in New York on Monday.

In currency trading, the euro rose to $1.2799 from $1.2762 late Monday in New York. The dollar fell to 76.85 yen from 76.89 yen.

[Associated Press; By GREG KELLER]

Pamela Sampson in Bangkok and Fu Ting in Shanghai contributed to this report.

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