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Stock markets supported by US economic hopes as European debt crisis festers
MOSCOW (AP) ' Stock markets rebounded Wednesday as renewed optimism over the state of the U.S. economy supported sentiment despite the failure of European finance ministers to announce radical new measures to deal with the crippling debt crisis afflicting the 17-nation eurozone.
Sentiment was dampened in the early part of the European session by the failure of eurozone ministers in Brussels on Tuesday to push forward radical plans to help calm market jitters over a debt crisis that's already seen three relatively-small countries get bailed out and is threatening much bigger Spain and Italy.
A decision on how to forge a closer fiscal union between the 17 eurozone countries will have to wait until the leaders' summit next week.
The ministers did agree to hand out euro8 billion ($10.7 billion) to Greece as part of its bailout to stem an immediate cash crisis, but they kicked more difficult issues ' such as whether countries should cede some control over their finances to a central European authority ' to the leaders of the European Union who meet next week.
Stocks have been relatively buoyant this week on expectations that the 17 countries that use the euro will finally come up with a plan to deal with their crushing debt crisis. Those hopes remain generally.
Buoyant U.S. consumer confidence figures on Tuesday also raised hopes that the world's largest economy is faring better than expected. A raft of economic data over the rest of the week will be closely eyed, not least Friday's nonfarm payrolls figures, which often set the market tone for a week or two after their release.
"With the longer term outlook for the U.S. economy becoming increasingly bullish, expectations are for a robust set of numbers to be seen in the days ahead," said Ben Critchley, sales trader at IG Index
In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 5,376 while Germany's DAX rose 1.2 percent to 5,870. The CAC-40 in France was 0.6 percent higher at 3,044.
The euro meanwhile was flat at $1.3322, despite figures showing inflation in the eurozone at a stubbornly-high level of 3 percent ' a full percentage point above the European Central Bank's target ' and a further uptick in the unemployment rate to 10.3 percent.
Wall Street was also headed for a higher opening on Wednesday following the previous session's gains. Dow futures rose 0.7 percent to 11,642 and S&P 500 futures were 0.8 percent higher at 1,206.
Europe's ongoing battle to contain its debt crisis is likely to remain the main a key driver in markets for a while to come especially if countries continue having to pay elevated interest rates to get investors to lend them money.
On Tuesday, Italy was forced to pay a high interest rate on an auction of three-year debt Tuesday. The 7.89 percent rate was nearly three percentage points higher than last month, an enormous increase.
If Italy were to default on its debt of euro1.9 trillion ($2.5 trillion), the fallout would hurt not only the common European currency, but would also send shock waves through the global economy. Such a prospect has left little appetite for risky assets.
Many observers say the 17 nations that use the euro have little choice but to back proposals for a closer coordination of their spending and budget policies. This would reduce their ability to run budget deficits, but could potentially pave the way for much more aggressive support from the European Central Bank.
Analysts at Credit Agricole CIB said in a report that "until concrete and detailed plans for a solution to the crisis are announced, the downward trend" in stocks will continue.
Ratings downgrades for many of the world's largest banks also drove investors to the sidelines. Standard & Poor's on Tuesday lowered its credit ratings for 37 financial companies, including Bank of America Corp., Citigroup Inc. and HSBC Holdings PLC.
Earlier, Asian stocks closed lower on Wednesday. Japan's Nikkei 225 index dropped 0.5 percent to close at 8,434.61. South Korea's Kospi dropped 0.5 percent to 1,847.51. Hong Kong's Hang Seng dipped 1.5 percent to 17,989.35.
AP business writer Pamela Sampson from Bangkok and AP researcher Fu Ting from Shanghai contributed to this report.