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March 20, 2012 > Markets shored up by US economic hopes

Markets shored up by US economic hopes

By Pan Pylas, AP Business Writer

LONDON (AP), Mar 13 - Optimism over the U.S. helped shore up global markets Tuesday ahead of the latest policy statement from the U.S. Federal Reserve.

And with Greece cleared to get its next round of bailout cash, thereby avoiding imminent bankruptcy, investors are confident that the latest acute phase in Europe's two-year debt crisis has abated.

``We might just be in a holding pattern for a short while, the calm after the storm if you like, as we move away from central bank intervention and the Greek default and toward a focus on the underlying economic data,'' said Gary Jenkins, managing director of Swordfish Research. ``The European sovereign crisis is likely to be with us for a while and the markets are likely to stay fragile until there is some sign of sustainable economic growth.''

In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 5,934 while Germany's DAX rose 0.9 percent to 6,962. The CAC-40 in France was 0.9 percent higher too at 3,520. The euro underperformed however, trading 0.1 percent lower at $1.3139.

Wall Street was poised for a solid opening too with both Dow futures and the broader S&P 500 futures up 0.5 percent.

Most interest later will center on the Fed. Though no policy changes are anticipated, investors will be closely monitoring the accompanying statement to see if U.S. rate-setters are a bit more confident about the state of the recovery following a run of upbeat economic data, particularly on the jobs front. February retail sales figures later, which are expected to rise by a monthly rate of 1.1 percent, will be assessed in that context.

Europe's debt crisis will never be too far from investors' minds though despite recent signs of easing.

The news overnight that Spain's euro partners have allowed the country to run a deficit of 5.3 percent of gross domestic product this year, above the original 4.4 percent target, has generated some concerns that the hoped-for goal of more budgetary discipline within the eurozone may not be as stringent as hoped.

``The problem with Spain missing its targets on debt reduction is the fear of contagion,'' said Simon Furlong, a trader at Spreadex. ``Europe simply cannot afford to bail out Spain, and with investors as skittish as they are over Europe, demand could easily flow away from Spanish debt if it is perceived that they cannot get to grips with their debt.''

Earlier in Asia, South Korea's Kospi rose 1.1 percent to 2,025.04 but Hong Kong's Hang Seng added 1 percent to 21,339.70.

The Nikkei 225 index in Japan closed less than 0.1 percent higher at 9,899.08 with trading little-affected by the Bank of Japan's decision to keep its benchmark interest rate unchanged at zero to 0.1 percent. Japan's central bank also said it is allowing companies in areas struck by a disastrous earthquake and tsunami in March 2011 an extra year to pay back debts and adding more money to lending to encourage growth.

Oil prices tracked developments in most stock markets, with benchmark oil for April delivery up 53 cents to $106.87 per barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

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