Stocks rally further in run-up to EU summit
MOSCOW — Stocks advanced Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth across the continent, though ongoing worries over the upcoming Greek election kept the rally in check.
Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.
On Wednesday, the leaders of the 27 European Union countries will hold an informal meeting in Brussels. The summit is expected to focus on ways to kick start the region’s faltering economy.
“There have been lots of comments from various officials regarding the wish of the EU for Greece to remain in the eurozone, the need to agree upon a growth agenda to go alongside the austerity agenda and of course on common euro bonds,” said Gary Jenkins, managing director of Swordfish Research.
With that backdrop, stocks have recovered this week after a parlous few sessions.
In Europe, Germany’s DAX rose 0.6 percent to 6,367 while the CAC-40 in France was 0.6 percent higher at 3,045. The FTSE 100 index of leading British shares was up 0.7 percent at 5,344, helped by figures showing that the annual inflation rate dropped to 3 percent in April, its lowest level since February 2010.
Wall Street was poised for a fairly subdued opening after Monday’s solid advance — both Dow futures and the broader S&P 500 futures were down 0.2 percent.
Europe’s debt crisis as well as developments in Greece has the potential to knock the rebound in sentiment witnessed so far this week.
“Markets are by no means out of the woods, however, and much uncertainty will remain ahead of Greece’e election in just less than a month,” said Mitul Kotecha, head of global strategy at Credit Agricole CIB.
If a new government fails to follow through with an austerity plan agreed to by prior Greek leadership, the country could lose a promised multibillion euro bailout from international lenders. Greece’s default could send shockwaves throughout Europe.
The Organization for Economic Cooperation Development’s top economist warned on Tuesday that the 17-country eurozone risks falling into a “severe recession” and called on governments and Europe’s central bank to act quickly to stop the slowdown spilling over into the global economy.
The organization now forecasts a longer and deeper contraction in the eurozone than in its November report, with the eurozone economy expected to shrink in 2012, and only manage a feeble recovery in 2013.
Earlier, Asian markets posted sizeable gains. Japan’s Nikkei 225 index rose 1.1 percent to close 8,729.29 and Hong Kong’s Hang Seng added 0.6 percent to 19,039.15. South Korea’s Kospi climbed 1.6 percent to 1,828.69.
Hopes that China will announce new measures to boost growth also helped push shares higher. Investors were encouraged by weekend statements from Chinese Premier Wen Jiabao, who promised to spur the world’s second-largest economy, a shift from previous rhetoric about curbing inflation.
In the oil markets, benchmark oil for June delivery was down 49 cents to $92.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.09 to settle at $92.57 in New York on Monday.
In currencies, the euro slipped to $1.2760 from $1.2793 late Monday in New York. The euro hit a four-month low against the dollar on Thursday. The dollar was up at 79.60 yen from 79.36 yen.