Markets rise on euro hopes, US jobs improvement

AP News
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Posted: Dec 02, 2011 10:27 AM
Markets rise on euro hopes, US jobs improvement

Global markets rose on Friday as investors welcomed German Chancellor Angela Merkel's call to enforce tighter government spending rules and a surprise drop in the U.S. unemployment rate.

In a closely scrutinized speech to Germany's parliament, Merkel said the 17 nations that use the euro currency must move quickly to restore market confidence, changing EU treaties to make financial controls stricter and more binding.

She reiterated her objection to so-called eurobonds _ debt jointly backed by eurozone countries _ and warned that the debt crisis will take years, not months, to fix. But her call for long-term changes suggested a commitment to strengthen financial union between countries in the euro, something analysts have said is necessary to make sure the eurozone doesn't break up.

Merkel and French President Nicolas Sarkozy are meeting Monday to discuss potential treaty changes. The talks will culminate in a Dec. 9 summit of EU leaders, where the proposals are expected to be debated and detailed.

Investors are hoping if eurozone governments agree to longer-term changes in the way they control their finances, the European Central Bank will agree to step up its interventions in the bond markets. Those interventions keep borrowing rates down for debt-troubled nations like Italy.

Whether the ECB will agree to step up its bond purchases is not clear, although its President Mario Draghi hinted Thursday that it was a possibility.

"Expectations have been growing that a 'Grand Plan' will be delivered next week," said Frederik Ducrozet, analyst at Credit Agricole CIB.

European stocks rose, as did bonds for Italy and Spain. Britain's FTSE 100 gained 1.1 percent to 5,548.87 while Germany's DAX added 1.0 percent to 6,094.66. France's CAC-40 climbed 1.4 percent to 3,172.22.

Italy's 10-year bond yield was down to 6.52 percent, almost a full percentage lower than Wednesday, an indication investors have high hopes of next week's talks to save the euro. Spain's 10-year yield was down to 5.56 percent.

Wall Street also rose on the open _ the Dow Jones industrial average was up 0.8 percent at 12,111 while the Standard & Poor's 500 rose 0.8 percent to 1,255 after the release of cautiously upbeat U.S. jobs data.

The U.S. government said the unemployment rate fell to 8.6 percent in November, the lowest in 2 1/2 years and better than economists' expectations for an unchanged rate of 9 percent.

The world's largest economy also added 120,000 jobs in November, while the previous two months were revised up to show another 72,000 more jobs were created _ the fourth straight month the government revised prior months higher.

Although the drop in the unemployment rate was unexpected, the increase in jobs was roughly as forecast by most analyst.

Earlier in Asia, Japan's Nikkei 225 index rose 0.5 percent to end at 8,643.75, its highest closing in three weeks. Hong Kong's Hang Seng rose 0.2 percent and Australia's S&P/ASX 200 added 1.4 percent.

South Korea's Kospi was marginally down and mainland Chinese shares also lost ground as investors cashed in on earlier gains. The benchmark Shanghai Composite Index lost 1 percent.

Markets continued to enjoy some momentum from Wednesday, when the U.S. Federal Reserve, European Central Bank, Bank of England and the central banks of Canada, Japan and Switzerland jointly made it easier for banks to borrow dollars.

The coordinated effort was meant to prevent Europe's debt crisis from exploding into a global panic. Should a European bank fail or if a country default on its debt, investors fear it could result in a freeze-up in global lending like the one that occurred in 2008 when Lehman Brothers collapsed.

China's central bank also acted to release money for lending and to shore up growth by lowering bank reserve levels for the first time in three years. The bank actions caused global stocks to rally Thursday.

Benchmark oil for January delivery was down 5 cents to $100.15 per barrel in electronic trading on the New York Mercantile Exchange on Friday. The contract lost 16 cents to end at $100.20 per barrel on the Nymex on Thursday.

In currency trading, the euro rose to $1.3478 from $1.3460 late Thursday in New York. The dollar rose to 77.93 yen from 77.76 yen.

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Pamela Sampson in Bangkok contributed to this report.