European stocks rise on upbeat IMF report

LONDON -- European stocks rose and Wall Street was expected to open higher Wednesday as an upbeat report by the International Monetary Fund and a fall in Germany's unemployment rate offset worries over weak U.S. consumer confidence. Asian markets were mixed.

Germany's DAX was up 0.2 percent at 5,727.10, Britain's FTSE 100 gained 0.2 percent at 5,170.07 and France's CAC-40 rose 0.5 percent to 3,832.24.

Gains in Japan were limited by a rise in the yen, which hurts its exporters, while Wall Street was expected to edge up on the open. Dow industrials futures were up 36 points at 9,709.00 and Standard & Poor's 500 futures were up 4.50 points at 1,059.30.

The IMF reduced its estimate of likely losses from the financial crisis in the three years to 2010 -- by $600 billion to $3.4 trillion -- as the world economy grows faster than previously expected.

"Systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement in the real economy," the IMF said in its half-yearly Global Financial Stability Report.

"There is growing confidence that the global economy has turned the corner, underpinning the improvements in financial markets," it added.

The IMF cautioned, however, that there was still a strong need for extra capital.

In Europe, sentiment was further helped by German data showing the unemployment rate dropped to 8 percent in September from 8.3 percent in August, thanks largely to a traditional autumn upturn in the labor market. Still, the figure was better than many analysts expected.

"Although September's fall in German unemployment was flattered by yet more statistical changes, the labour market still appears to be holding up better than elsewhere," Jennifer McKeown, economist at Capital Economics, wrote in a note.

However, she warned there is likely to be another rise in joblessness in coming months, keeping consumer spending relatively weak.

The data reassured investors, who were shaken Tuesday by weak figures on U.S. household optimism. The Conference Board said its consumer confidence index fell to 53.1 in September. Economists had been expecting a reading of 57.

The private research group said consumers are still worried about losing their jobs. Many experts warn a turnaround in the economy won't hold unless consumer spending picks up and employers add jobs.

World stocks have mostly rallied since March on optimism about growth prospects as the global recession fades. But some analysts warn markets may have rallied too far and too fast.

"In a nutshell, despite the recent improvement in confidence, the current indices are still consistent with huge uncertainty looming over the pace of the recovery of private consumption looking forward," said Sebastien Barbe, analyst at Calyon.

In Asia, Japan's Nikkei 225 stock average closed up 33.03 points, or 0.3 percent, at 10,133.23 while Hong Kong's Hang Seng shed 57.92, or 0.3 percent, to 20,955.25. South Korea's Kospi lost 1 percent to 1,673.14.

China's Shanghai index rose 0.9 percent to 2,779.43. China's financial markets close Thursday for the weeklong National Day holiday and reopen October 9.

Elsewhere, Australia's market fell 0.2 percent, Singapore was down 0.4 percent and Taiwan's index gained 1.1 percent.

On Wall Street on Tuesday, the Dow fell 0.5 percent, the S&P 500 slipped 0.2 percent, and the Nasdaq composite index fell 0.3 percent.

Oil prices rose above $67 a barrel despite an increase in U.S. crude inventories for a third week, indicating weak consumer demand. Benchmark crude for November deliver was up $1.22 at $67.93. The contract fell 13 cents to settle at $66.71 on Tuesday.

The dollar fell to 89.49 yen from 90.12 yen and the euro rose to $1.4665 from $1.4581.