Markets recover early losses on stimulus hopes

AP News
Posted: Aug 24, 2012 12:29 PM
Markets recover early losses on stimulus hopes

LONDON (AP) — Global markets recovered from earlier losses on Friday on hopes that central banks will act to support their weakening economies.

Economic indicators from the United States, China and Europe have been consistently downbeat this week. The job market in the U.S. is struggling to recover, weighing on consumer spending, one of the world's main drivers of growth. The other such driver — Chinese manufacturing — is contracting. In Europe, uncertainty over countries' debt problems is keeping many countries in recession.

Some traders, however, expect central banks and governments will offer more stimulus measures. Those hopes were boosted by reports Friday that Federal Reserve chief Ben Bernanke sees scope for more economic stimulus.

In Europe, Germany's DAX closed 0.3 percent higher at 6,971.07 while France's CAC 40 ended flat at 3,433.21. Britain's FTSE 100 also closed unchanged, at 5,776.60, despite revised official data showing the economy contracted 0.5 percent in the second quarter, less than earlier estimated. The number, however, leaves the country in recession.

Wall Street edged higher — the Dow gained 0.5 percent to 13,122.31 and the broader S&P 500 rose 0.4 percent at 1,408.29.

Despite the increases on Friday, market sentiment remains fragile amid mixed signals from policymakers.

On Wednesday, minutes of the Federal Reserve's last policy meeting showed bankers favored more stimulus. The president of the St. Louis Fed said officials were considering new data that might make further action unnecessary but Bernanke was cited in a letter published Friday as saying he saw scope for more stimulus.

Meanwhile, the European Central Bank is expected to present in coming weeks a plan to help indebted countries like Spain and Italy by buying their government bonds. The ECB, however, must first win over Germany's national central bank, which is skeptical of the plan.

Greece's financial troubles also remain an unresolved risk for the continent's investors.

Greek Prime Minister Antonis Samaras is on a week-long diplomatic tour around Europe to convince his fellow eurozone leaders to give him more time to fix his country's economy and public finances.

Samaras on Friday met with Chancellor Angela Merkel, who balked at granting Greece more time, saying it must complete its reforms. She insisted, however, that Greece would remain within the eurozone.

Samaras will next travel to France for talks with President Francois Hollande on Saturday.

But hopes for a quick resolution of the matter were dealt a blow by Germany's finance minister, Wolfgang Schaeuble, who said more time would not solve Greece's problems.

Earlier, in Asia, Japan's Nikkei 225 declined 1.2 percent to 9,070.76 and China's benchmark Shanghai Composite Index lost 1 percent to 2,092.1. Hong Kong's Hang Seng shed 1.3 percent to 19,880.03.

South Korea's Kospi declined 1.2 percent to 1,919.81, while Australia's S&P ASX 200 was off 0.8 percent at 4,349. India's Sensex shed 0.3 percent to 17,787.30.

In currencies, the euro fell to $1.2533 from $1.2566 late Thursday in New York. The dollar rose to 78.63 yen from 78.47 yen.

Benchmark oil for October delivery rose 58 cents to $96.85 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 99 cents to finish at $96.27 per barrel.


Joe McDonald in Beijing and Fu Ting in Shanghai contributed to this report.