Markets rise on Spain bailout hopes

AP News
Posted: Sep 21, 2012 10:13 AM
Markets rise on Spain bailout hopes

LONDON (AP) — Spanish stocks led a recovery in global markets Friday amid speculation the country was preparing to tap a new European aid program, a day after uncertainty about the fragile world economy dented investor sentiment.

Market confidence was shored up Friday by hopes that Spain was negotiating with its partners in the eurozone on a new economic reform program.

Experts see the reforms as the groundwork for Madrid to request financial aid from Europe's bailout fund and central bank. The assumption in the markets is that the package of reforms will mean the Spanish government won't have to make any embarrassing concessions in return for the help.

The ECB recently announced a bond-buying program meant to bring down the borrowing rates of countries that ask for financial aid. The plan has eased market tensions in recent weeks in Spain, but mainly on the assumption that Madrid will request the aid — something it has so far balked at doing.

"Adherence to a bailout plan does not actually guarantee the ECB will lift a finger to buy Spanish debt, but we think the market would still greet Madrid's debt pile through rosier spectacles than it does now," said Andrew Wilkinson, an analyst at Miller Tabak & Co.

In Europe, Germany's DAX rose 1 percent to 7,459, while the CAC-40 in France was 0.8 percent higher at 3,538 and Madrid's main IBEX index surged 1.7 percent to 8,159. Britain's FTSE 100 was down 0.1 percent at 5,849

In the U.S., the Dow Jones industrial average was up 0.3 percent at 13,630 while the broader S&P 500 index rose 0.4 percent to 1,466.

The euro has also recovered its poise in light of the Spanish hopes, trading 0.2 percent higher at $1.30. Oil prices, which have also been under selling pressure in recent days, recouped some losses, with the benchmark New York rate up 81 cents to $93.23 a barrel.

Over recent weeks, market sentiment has been buoyed by new measures to deal with Europe's debt crisis and hopes that central banks would offer new economic stimulus. That helped stocks hit multi-month highs and the euro to spike above $1.30 for the first time since May.

Now that major central banks have provided the stimulus, investors have increasingly focused on the deteriorating global economy. On Thursday, a run of disappointing figures dented sentiment.

Earlier in Asia, Tokyo's Nikkei 225 index, gained 0.2 percent to 9,110.0 while China's benchmark Shanghai Composite Index added 0.1 percent to 2,026.69. Hong Kong's Hang Seng rose 0.7 percent to 20,734.94.