published Tuesday, July 17th, 2012

US, China stimulus hopes give markets a lift

  • photo
    In a July 13, 2012, file photo, traders work as the New York Stock Exchange nears closing. JPMorgan Chase blew away a cloud of concern hanging over the banking industry Friday and set off a rally in stocks. (AP Photo/Bebeto Matthews)
    Photo by Associated Press

CARLO PIOVANO

LONDON (AP) — Global markets rose Tuesday on hopes that the United States and China might take new steps to combat a downturn in economic growth.

Confidence in the world economy has been shaken in recent weeks as the three largest economies — the U.S., China and the 17-country eurozone — have shown increasing signs of weakness.

A key focus later will be Federal Reserve chief Ben Bernanke, when he addresses Congress about the state of the U.S. economy.

Investors will look for any hints that the central bank may back a new stimulus for the U.S. economy following a run of disappointing economic news. Jobs growth is weak and activity in key manufacturing and services sectors is waning.

"Markets are only really interested in one question answered: after the recent run of data, is Bernanke willing to give a clearer signal that (more stimulus) is on the way?" said Marc Ostwald, strategist at Monument Securities.

In China, the world's second-largest economy, investors hope monetary authorities will likewise provide relief after second-quarter annual growth fell to a three-year low of 7.6 percent.

Expectations of a further stimulus in China have risen after Premier Wen Jiabao's weekend promise of tax breaks and other aid to struggling small businesses.

Those hopes encouraged some investors to buy into stocks, the euro and commodities.

In Europe, Germany's DAX was up 0.4 percent to 6,593.04 and France's CAC-40 added 0.4 percent to 3,193.98. London's FTSE 100 was the only major index to drop, trading 0.2 percent lower to 5,652.38. The euro was up 0.3 percent at $1.2299.

Wall Street was expected to rise on the open — both Dow and S&P 500 futures were up 0.4 percent.

Earnings reports in the U.S. will be a key focus for traders later in the day too. Coca-Cola Co., Goldman Sachs, Intel, Johnson & Johnson and Yahoo are among the big corporations due to release second-quarter figures.

In Europe, the outlook remains gloomy as the region's financial crisis keeps businesses and households worried about investments and jobs.

Germany's ZEW institute said Tuesday that its index of investor confidence unexpectedly fell in July for the third month in a row, to minus 19.6 points from minus 16.9 in June. The consensus in the markets was for a small increase to minus 15.0.

Germany, Europe's largest economy, is increasingly being affected by the financial turmoil shaking other countries in the currency union.

Market confidence was helped somewhat by a well-received Spanish debt auction. The government saw good demand for its 12- and 18-month bills and paid lower interest rates than at the last such auction in July.

Investors continue to await more details of a eurozone bailout for Spain's banks. This week, the eurozone is expected to give Spain €30 billion as part of a package that could be as large as €100 billion.

Earlier in Asia, Japan's Nikkei 225 closed 0.4 percent higher at 8,755.00 and China's Shanghai Composite Index gained 0.6 percent to 2,161.19. South Korea's Kospi added 0.2 percent to 1,821.96 and Hong Kong's Hang Seng jumped 1.8 percent to 19,455.33.

Oil prices were steady, with benchmark crude up 7 cents at $88.50 a barrel in electronic trading on the New York Mercantile Exchange.

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