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World stocks muted amid doubts summit will produce bold solution to Europe debt crisis
BANGKOK (AP) ' World stocks were subdued Thursday ahead of a key summit seen as perhaps the last chance for European leaders to cauterize a crippling debt crisis before it drags the region into a potentially severe recession.
Benchmark oil rose above $100 per barrel while the dollar fell against the euro and the yen.
European shares opened higher on hopes that German Chancellor Angela Merkel and French President Nicolas Sarkozy would succeed in drumming up support for a debt crisis plan from key conservative European politicians at a meeting in Marseille, France before moving on to Brussels for a crucial European Union summit.
Britain's FTSE 100 rose 0.6 percent to 5,582.63. Germany's DAX jumped 1.1 percent to 6,061.80 and France's CAC-40 was 0.9 percent higher at 3,205.60.
Wall Street appeared headed for a mixed opening. Dow Jones industrial futures rose marginally to 12,218 while S&P 500 futures were down less than 0.1 percent at 1,263.50.
Stocks endured a minor drubbing in Asia earlier in the day. Japan's Nikkei 225 fell 0.7 percent to 8,664.58, dragged down by weaker-than-expected machinery orders. South Korea's Kospi lost 0.4 percent to 1,912.39 and Hong Kong's Hang Seng shed 0.7 percent to 19,107.81.
Benchmarks in Australia, Singapore, Taiwan and India also fell. But mainland Chinese shares rose, with the benchmark Shanghai Composite Index gaining 0.1 percent to 2,329.82 after losing more than 1 percent earlier in the day to approach an intraday low for the year. The Shenzhen Composite Index gained 0.1 percent to 970.95.
Just hours before the summit of European leaders was to open in Brussels, doubts were surfacing that a lasting solution to the two-year-old crisis would be reached. Failure risks causing a breakup of the euro, a shock that could cause a deep recession in Europe and spread through the world economy.
One point of friction has surfaced over a proposal by France's Sarkozy and Germany's Merkel, leaders of the two economic powerhouses among the 17 nations that use the euro. They are demanding far-reaching changes to the treaty governing the European Union to enforce fiscal discipline among its members.
That proposal is being met with resistance by the European Council, an institution that defines the priorities of the entire 27-nation EU. Its president, Herman Van Rompuy, favors going a simpler route ' amending existing rules that apply to the 17 euro countries to avoid the trickier step of requiring every country to approve the new treaty.
The disagreement has soured hopes for an immediate solution to the crisis.
"Normally this kind of talk would take place behind closed doors. The fact that it's in the open suggests it already has and normal channels have, at least temporarily, broken down," analysts at DBS Bank Ltd. said in a research note.
Additionally, certain provisions in the Franco-German proposal, such as setting automatic penalties for countries that overspend, are controversial and have the potential to delay an agreement.
The intensifying debt crisis and lack of radical solution ' such as the issuance of eurobonds ' have roiled global stocks for months. Germany has resisted eurobonds due to fears that pooling debt would drive up its own borrowing costs, expose its taxpayers to the bad debt of weaker countries, and remove incentives for struggling nations to get their finances in order.
"Germany and the rest of Europe are going into two directions. The rest of Europe wants Germany to stand behind the euro but Germany does not want to be the lender of last resort," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "Because it ... will be the German taxpayer to foot the bill and I don't think that's what Germany wants."
Asian shares faced multiple headwinds. Australia unexpectedly eliminated 6,300 jobs in November. Most economists had predicted total employment would rise by 10,000.
Meanwhile, Japan's core private-sector machinery orders fell a seasonally adjusted 6.9 percent in October, the second consecutive month of decline. Financial markets had expected a 0.5 percent increase, Kyodo News Agency reported. That hurt industrial shares such as Nippon Steel, which lost 1.5 percent, and industrial supplier Mitsui & Co., down 2.1 percent.
Tokyo Electric Power, operator of the crippled Fukushima nuclear power plant, plunged 11.3 percent after a news report said the government is set to effectively nationalize the utility.
On Wall Street, the Dow rose 0.4 percent to close at 12,196.37. The Standard & Poor's 500 index rose 0.2 percent at 1,261.01. The Nasdaq composite index fell marginally to 2,649.21.
Benchmark oil for January delivery was up 41 cents to $100.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 79 cents to end at $100.49 per barrel on the Nymex on Wednesday.
In currencies, the euro rose to $1.3415 from $1.3394 late Wednesday in New York. The dollar fell slightly to 77.58 yen from 77.66 yen.
AP researcher Fu Ting contributed from Shanghai.