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World stocks steady following big retreat; euro caution remains
LONDON (AP) ' Stock markets steadied Tuesday after the previous day's big declines when investors fretted over the deal to fix the euro crisis by binding member economies closer together.
Optimism over last Friday's agreement by the 17 euro countries and nine others to adopt a new fiscal pact to prevent a repeat of the debt crisis evaporated Monday after credit rating agencies Moody's and Fitch both said it was insufficient and would not materially address the crushing debt loads of some nations or their rising borrowing costs.
Moody's warned that it will review all EU governments' ratings for possible downgrades in early 2012 ' a threat that analysts said was particularly worrisome to France, a major contributor to the European Financial Stability Facility, Europe's emergency bailout fund. A downgrade of France's triple A rating could hurt its ability to fulfill its commitments to the fund.
Investors are also awaiting the response of rival agency Standard & Poor's. Last week it warned that it could downgrade most of the eurozone economies, including Germany, if the deal failed to deliver.
"It was not the reaction to the summit that politicians had hoped for, but it was in line with previous market response to summits which are sold as being the solution to all of Europe's problems but end up raising more questions than they answer," said Gary Jenkins, an analyst at Evolution Securities.
Following Monday's big retreat, there's been a calmer tone in the markets, though skepticism over the deal's details remain.
In Europe, Germany's DAX recouped some of Monday's lost ground, trading 0.5 percent higher at 5,815 while the CAC-40 rose 0.1 percent to 3,092. The FTSE 100 index of leading British shares rose 0.4 percent to 5,450.
Wall Street was poised for modest gains at the open ' Dow futures were up 0.4 percent at 11,991 while the broader Standard & Poor's 500 futures rose an equivalent rate to 1,235.
The calmer tone was evident in the performance of the euro, which was trading 0.2 percent higher at $1.3195. On Monday, the single currency fell to a 10-week low over worries that Europe's new financial pact won't be enough to stop the region's growing debt crisis.
"The financial markets are now digesting the details of the EU deal struck last Friday, and it is quickly becoming apparent that the financial markets have once again given it the thumbs down, which could quickly result in increased concerns of major funding difficulties emerging in the first half of 2012 when there is sizable sovereign debt to be rolled over, in particular in Italy," said Derek Halpenny, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
Another currency in the headlines was the Indian rupee, which hit a fresh record low Tuesday, after a contraction in industrial output reported the day before. The currency touched 53.52 against the dollar, down over 21 percent since late July. It is the third time in three weeks that it has breached prior lows.
The plunging currency is further darkening the economic outlook for Asia's third largest economy. While a weak rupee can help exporters, it wreaks havoc with India's giant oil import bill, deepening the country's growing deficit.
"It clearly reflects the slowing economy in India and also the flight to the dollar of global money," said SMC Global Securities strategist Jagannadham Thunuguntla.
The benchmark Sensex index was up 0.6 percent in midday trade in Mumbai, as trading held steady after a punishing three-day slide.
Elsewhere in Asia, stocks took a battering following the previous day's retreats in Europe and the U.S.
Japan's Nikkei 225 fell 1.2 percent to close at 8,552.81 while South Korea's Kospi gave up 1.9 percent to 1,864.06 and Hong Kong's Hang Seng lost 0.7 percent to 18,447.17. On mainland China, the benchmark Shanghai Composite Index fell 1.9 percent to 2,248.59, its lowest in closing since March 2009. The Shenzhen Composite Index lost 3 percent to 921.32.
Oil prices tracked equities in Europe modestly higher ahead of a meeting of the OPEC oil cartel in Vienna, Austria, which is expected to see production levels left unchanged ' benchmark oil for January delivery was up 38 cents to $98.14 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok and Erika Kinetz in Mumbai contributed.