A roundup of trading on major world markets:
NEW YORK – A promised plan to restore long term confidence in the euro boosted Wall Street stocks and other risky assets.
In afternoon trade, the Dow Jones industrial average was up 68.46 points, or 0.57 per cent, at 12,087.88. The Standard & Poor’s 500 index was up 12.06 points, or 0.97 per cent, at 1,256.34. The Nasdaq composite index gained 27.26 points, or 1.04 per cent, at 2,654.19.
Financials stocks were among the biggest winners. Investors have feared that US banks might be dragged down by their close connections to the unstable European financial system.
The leaders of France and Germany, the two strongest economic powers in the euro area, have called for a new European Union treaty designed to avert another crisis by imposing greater fiscal discipline on member countries.
Ballooning deficits in Greece, Portugal and Ireland have forced those countries take bailouts from their neighbours.
Investors are hoping that a summit of European leaders this Friday will produce concrete measures to prevent a messy breakup of the euro currency, which is shared by 17 nations.
Markets have been jittery because of fears that the euro might disintegrate, causing a sharp recession in Europe that would spread through the world economy.
While the statements from French President Nicolas Sarkozy and German Chancellor Angela Merkel were far from a long term solution, investors are eager to buy on any hint of good news because they have been earning meagre returns from relatively low-risk investments such as Treasurys and CDs, said Brian Gendreau, investment strategist with Cetera Financial Group.
LONDON – European stocks advanced and bond yields fell after France and Germany announced eurozone reform proposals and Italy fresh austerity measures at the start of a critical week for the euro.
European stocks gave up some of their gains at the end of trading, with London’s FTSE 100 index closing up 0.28 per cent to 5,567.96 points.
In Frankfurt the DAX-30 ended with a gain of 0.42 per cent to 6,106.09 points and in Paris the CAC-40 climbed 1.15 per cent to 3,201.28 points.
In foreign exchange trading, the euro rose after Sarkozy and Merkel began speaking, before settling later in the day.
Tension on the eurozone bond market eased markedly, with interest rates demanded on Italian and Spanish 10-year bonds falling sharply.
In a sign of rising market confidence, Italy’s long-term borrowing rate fell back below the key six per cent threshold for the first time since the end of October, dropping to 5.94 per cent from 6.661 on Friday.
The yield on 10-year Spanish bonds also fell to 5.09 per cent from 5.626 per cent on Friday.
The difference between France’s and Germany’s costs narrowed to less than one percentage point.
Milan shares jumped 2.91 per cent as investors hailed the approval of an austerity budget by the government of new Italian Prime Minister Mario Monti.
Monti’s cabinet gave its go-ahead to the crisis-busting plan on Sunday, estimating that it would save 20 billion euros ($A26.29 billion) but warning that it would not prevent the economy from slipping back into recession next year.
He warned on Monday that Italy would “collapse” like Greece if it does not adopt harsh austerity measures.
Dublin stocks added 1.72 per cent as the Irish government began rolling out a 3.8-billion-euro austerity budget this afternoon.
HONG KONG – Hong Kong shares gained 0.73 per cent following strong US jobs data and ahead of a French-German mini-summit aimed at thrashing out a plan to save the eurozone.
Hong Kong’s benchmark Hang Seng Index was 139.3 points higher at 19,179.69 on turnover of $HK51.94 billion ($6.68 billion).
The US Labor Department said on Friday that unemployment dropped to a 32-month low of 8.6 per cent in November, surprising most analysts who had forecast it would hold at nine per cent.
On Monday eyes moved to Europe, where a mini-summit involving French President Nicolas Sarkozy and German Chancellor Angela Merkel hopes to come up with a plan to save the eurozone. Their proposals will go in front of EU heads at a full summit at the end of the week.
Retailer Esprit, which makes the bulk of its cash in Europe, surged 8.7 per cent to HK$11.98, while exporter Li & Fung rose 3.3 per cent to HK$16.94.
Snack-food maker Want Want China, which joined the Hang Seng Index on Monday, rose 3.1 per cent to HK$8.20.
The market was also buoyed by hopes that Beijing will announce fresh monetary easing after last week’s cut in the reserve requirement ratio – the amount banks must keep in reserve.
However, Shanghai fell 1.16 per cent. Dealers said investors had already factored in last week’s announcement, which took effect on Monday.
The composite index, which covers both A and B shares, was down 27.43 points at 2,333.23 on turnover of 48.6 billion yuan ($7.7 billion).
WELLINGTON – New Zealand shares rose, paced by Fletcher Building, after it was revealed construction figures weren’t as weak as feared. Chorus extended its slide, driven by index-weighted funds.
The NZX 50 rose 18.83 points, or 0.6 per cent, to 3,301.22. Within the index 24 stocks rose, 20 fell, and six were unchanged.
