Greece leads European, US markets higher on hopes of EU support amid debt crisis

Greece leads world stocks higher on EU rescue hope

LONDON — European and U.S. markets rose Tuesday, with Greece leading the charge, on hopes that EU officials will provide the eurozone’s most heavily indebted economies with some form of support.

News that European Central Bank President Jean-Claude Trichet cut short a trip in Australia to attend an EU summit on Thursday, where heads of state and government will address fiscal problems, bolstered investor sentiment.

Britain’s FTSE 100 index closed up 0.4 percent at 5,111.84, while Germany’s DAX gained 0.2 percent to 5,498.26 and France’s CAC 40 was up 0.2 percent at 3,612.76. Greece’s main index was the outperformer, though, jumping 5.0 percent to 1,895.96.

Asian indexes were mixed at the close but Wall Street rose. The Dow industrials average was up 1.5 percent at 10,058.33 and the Standard & Poor’s 500 index rose 1.3 percent to 1,070.04.

“This meeting of EU leaders is set to discuss the economic roadmap of the eurozone for the next 10 years; however it is difficult to see how the problems of Greece and other vulnerable indebted nations won’t overshadow the summit,” said Michael Hewson, analyst at CMC Markets.

Greece’s government has vowed wage and pension reform in an effort to gain credibility in its plan to drive down its debt load. However, nationwide strikes were planned for Wednesday, possibly undercutting any confidence in the country’s plan.

“It would appear that these countries still don’t get it, and this starkly highlights the problems ahead for the politicians as they seek to find a resolution to a problem that threatens to undermine the entire concept of the single currency,” Hewson said.

He said a bailout would be very problematic, since that would urge other heavily-indebted countries to seek the same treatment — most governments piled on debt in the wake of the financial crisis.

Some experts believe the European Central Bank may come up with a form of support which would not require a bailout, such as guarantees for debt. Alternatively, big economies like Germany and France could offer support in some form.

The fact that Trichet will attend the summit on Thursday “has increased speculation that the EU may be on the verge of providing some support for its high yielding economies,” said Stuart Bennett, analyst at Calyon. High yields are a symptom of falling bond prices and increased perception of risk.

However, worries that confidence in Greece’s debt will erode and spread to other countries with weak public finances — such as Portugal or Spain — has kept investors on edge.

The euro remained jittery after a report from the U.S. Commodity Futures Trading Commission showed speculators have amassed a record-size bet against the single currency.

VTB Capital analyst Neil MacKinnon said that after a significant drop in the euro over the last week, such bets are being pared back, but investors will look to the EU leaders’ reaction to Greece’s woes for their next cue.

“Thursday’s EU summit is the real litmus test,” said MacKinnon. “If it fails to come up with any debt restructuring package or a quasi-bailout, then the pressure on the euro will increase.”

The euro was up at $1.3761 in European trading Tuesday from $1.3650 late Monday in New York. The dollar rose to 89.44 yen from 89.17 yen.

In Asia, Tokyo’s Nikkei 225 stock average lost 0.2 percent to 9,932.90 while Sydney’s S&P-ASX 200 declined 0.4 percent to 4,505.1 after the Dow closed below 10,000 for the first time in three months.

Chinese markets fared better, but trading has been listless as investors hunker down ahead of a weeklong closure of mainland exchanges for next week’s Lunar New Year holiday. The benchmark Shanghai Composite Index gained 0.5 percent to 2,948.84 and Hong Kong’s Hang Seng index advanced 1.2 percent to 19,790.28. Seoul’s Kospi rose 1.1 percent to 1,570.49.

Elsewhere, benchmarks in Thailand, Malaysia and the Philippines fell. Markets in Singapore, Taiwan and India posted solid gains.

Asian stocks are so sensitive to the health of Western export markets that analysts say even regional developments as severe as Toyota Motor Corp.’s struggles with a spate of safety problems have little impact.

Oil prices rose above $72 a barrel in Europe with benchmark crude for March delivery up 59 cents at $72.48.

AP Business Writer Joe McDonald in Beijing contributed to this report.