Greece leads European markets higher amid hopes of EU-led support package

Greece rescue hopes help European markets

LONDON — Greek shares led European markets higher Wednesday on hopes EU leaders would agree on a fiscal support plan for the heavily indebted country, but Wall Street edged lower after Federal Reserve Chairman Ben Bernanke discussed how stimulus measures in the U.S. would be withdrawn.

The FTSE 100 index of leading British shares closed up 0.4 percent at 5,131.99, while Germany’s DAX rose 0.7 percent to 5,536.37. The CAC-40 in France was 0.6 percent higher at 3,635.61.

Greek shares led the advance in Europe, with the main composite index closing up 2.4 percent. Stock markets in Spain and Portugal — two countries with similar problems — also posted strong gains.

Asian indexes also closed higher, but investors on Wall Street were unnerved by Bernanke’s statements on how stimulus measures might be reeled in. The Dow Jones industrial average fell 0.3 percent to 10,025.31, while the Standard & Poor’s 500 lost 0.4 percent to 1,066.06.

Sentiment in Europe was more upbeat, helped by reports that European Union governments are discussing how to help Greece handle its debt load, avoid a disastrous default and keep the market crisis from spreading to other vulnerable countries.

“Of course, we are running through worst-case scenarios,” a German official said on condition of anonymity. “Greece has to present a credible volume of cuts. Agreement on that would be an important signal from tomorrow’s summit.”

The Greek premier will meet with other EU leaders in Brussels on Thursday, and the hope is that they will agree to some sort of financial support for Greece, which has been struggling to reassure markets that it can get a grip on its massive borrowings amid a nationwide strike.

Analysts say EU nations could offer loan guarantees or financial assistance from countries that want to help, and that Germany and France could play a leading role.

Still, officials say no final decisions have been made and that talks in the next 24 hours would be crucial.

“If, and it remains a reasonable ‘if,’ this happens tomorrow, the commitment will have to be strong enough to placate markets while retaining a pretense that this is not tantamount to a bailout,” said Daragh Maher, an analyst at Calyon Credit Agricole.

“In the end, the EU either directly or through a promise of conditional support may well end up being Greece’s savior, but many will wonder if this will leave this knight in shining armor looking a little tarnished,” he added.

Crucial to any deal is the position of Germany, the euro zone’s biggest economy, and the signs are that there’s a growing acceptance within Chancellor Angela Merkel’s government that Germany will have to somehow help stave off this crisis before it spreads.

Hopes for a rescue deal — in whatever form it might come — also have given Greek bond prices some support. On Tuesday the spread between Greek and German 10-year yields dropped — a clear sign that investors think a default is less likely.

“The respite provided by the temporarily improving conditions in the bond markets gave some much needed impetus for equities, which in recent sessions have wanted to give up the ghost,” said David Buik, markets analyst at BGC Partners.

After recovering for three days, the euro was down slightly at $1.3718 from about $1.3790 earlier in the day.

Earlier in Asia, Japan’s Nikkei 225 index closed 0.3 percent higher at 9,963.99, while Hong Kong’s Hang Seng rallied 0.6 percent to 19,922.22.

Australia’s benchmark gained 0.2 percent to 4,513.40, while China’s Shanghai index advanced 1.1 percent to 2,982.50, helped by strong trade figures for January — indicating a recovery in both global demand and Chinese consumption is on track.

“We can see China’s trade has entered a stable stage,” said Shanghai Securities economist Hu Xiaoyue. “Unless there’s another round of the financial crisis, China’s export recovery is well on track and won’t see a double dip.”

Markets in India, Taiwan, Malaysia and Indonesia also gained.

Only South Korea bucked the regional trend with the Kospi index slipping 0.37 of a point, less than 0.1 percent, to 1,570.12.

Oil prices fell modestly, with benchmark crude for March delivery down 65 cents at $73.10 a barrel after U.S. crude supplies rose last week.

AP Business Writer Pan Pylas in London contributed to this report.