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US markets set to open higher on European hopes
AMSTERDAM (AP) U.S. stock markets were poised to follow Europe's lead Tuesday and make modest gains on guarded optimism that region's finance ministers were working to ease Spain's banking crisis.
By early afternoon in Europe, Britain's FTSE 100 was up 0.8 percent 5,675.43. France's CAC-40 was up 1.1 percent at 3,191.21, while Germany's DAX rose 1.09 percent to 6,457.55.
It was the first time in a week European stocks have risen, and futures augured gains on Wall Street. Dow futures were up 0.37 percent at 12,738 and S&P 500 futures were up 0.30 percent, at 1,352.50.
Early Tuesday morning, eurozone finance ministers agreed some terms for Spain's bank bailout, with up to $30 billion (24.4 billion) being made available by the end of the month. Representatives from the 27 European union countries agreed later Tuesday to grant an extension on Spain's program of deficit cuts until 2014. The interest rate, or yield, on Spain's 10-year bond dropped from a high Monday of 7.03 per cent to 6.79 percent in afternoon trade.
European stocks may also have been given a boost by better-than-expected manufacturing data from Britain and Italy.
The euro initially climbed on the news, but reversed course abruptly at around 8 a.m. Eastern Standard Time.
The dip may have been linked to remarks by St. Louis Federal Reserve Bank President James Bullard. Speaking in London, he said he didn't see any need for further quantitative easing in the U.S.
"In any case, it shows how fragile any recovery in the euro is, the level of caution with which people are treating this latest 'bailout,' if that's the correct term," said Paul Kavanagh of Killik & Co in London.
In Asia, stock markets had declined after China said the growth rate for its imports fell in June by half from the previous month's level to 6.3 percent while exports grew 11.3 percent, down from May's 15.3 percent.
China's slowing demand for oil, iron ore and other foreign goods is bad news for commodity-exporting economies and others that had been looking to relatively strong Chinese growth to help drive demand for their products.
China cut lending rates last week for the second time in a month in a bid to boost waning economic growth, but some analysts say policymakers have been too slow to react to signs of a sharp slowdown.
"Expectations have been high for a quick turnaround in economic growth but the reality has been a deliberate, ponderous easing that has failed to pre-empt the weaker economic data," said Sean Darby, chief global equity strategist for Jefferies. "Although valuations are appealing, a modest bearish position seems warranted until interest rates move to their cycle lows."
Japan's Nikkei 225 index fell 0.4 percent to 8,857.73 and Hong Kong's Hang Seng was off 0.2 percent at 19,396.40.
Benchmark oil for August delivery was down 71 cents at $85.25 a barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the euro fell to $1.2279 from $1.2309 late Monday in New York. The dollar dropped to 79.38 yen from 79.58 yen.