World stocks rise amid hopes for central bank help
MILAN—World stock markets rebounded Friday on anticipation that central banks will act to keep any political instability in Greece following weekend elections from destabilizing the global economy.
Uncertainty ahead of the Greek elections has weighed heavily on sentiment this week, but was lifted somewhat Friday by the prospect that central banks would provide monetary stimulus if political parties opposed to maintaining terms of the Greek bailout win the election on Sunday. Investors fear that reneging on its bailout terms would force Greece to leave the euro currency union, with uncertain consequences for financial markets and the global economy.
Britain's FTSE 100 closed 0.2 percent higher at 5,478.81 while Germany's DAX gained 1.5 percent to 6,229.41. France's CAC-40 rose 1.8 percent at 3,087.62.
The Dow Jones industrial average was up 0.4 percent at 12,704.85 while the Standard & Poor's 500 rose 0.5 percent to 1,335.51. In Asia, Japan's Nikkei 225 closed flat at 8,569.32, but Hong Kong's Hang Seng jumped 2.3 percent.
The Bank of England and the U.K. government said they stand ready to offer up to 140 billion pounds ($217 billion) in cheap loans to lenders that might have trouble raising money from credit markets, which could tighten up if the Greek elections' results spook investors.
The European Central Bank, meanwhile, continues to offer unlimited amounts of cheap short-term loans as well, even though its chief, Mario Draghi, has warned that Europe governments need to make bold decisions to shore up confidence in the euro.
Draghi said Friday the ECB has supported banks against the ongoing debt crisis with (EURO)1 trillion ($1.26 trillion) in emergency credit to banks and that now it was the governments' turn to act.
Germany, however, is reluctant to accept any big moves that might cost Berlin more money, such as jointly-issued eurobonds. Any solutions would be announced at a June 28 summit of world leaders.
"I think Europe will do something because they have to save Greece and Spain. If they don't, it will be the end of Europe," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "I think maybe the worst is over. I think we have reached the nadir. Finally they have been pushed to do something."
Illustrating the urgency of the situation, Spain and Italy have seen their borrowing rates jump higher this week. Should the two countries find it too expensive to finance themselves on capital markets, they would need money from Europe's bailout funds. The problem is their combined financing needs dwarf all the sums EU countries could provide.
Spanish Prime Minister Mariano Rajoy has asked EU leaders to push the European Central Bank to restart a program of purchases of government bonds that helped ease the country's borrowing rate last fall. The ECB, however, remains reluctant to do so, saying it would provide only temporarily relieve symptoms of underlying problems that need fixing by European governments.
In the U.S., speculation has grown that the U.S. Federal Reserve was preparing to pump more money into the economy to breathe life into its slackening recovery. Weak economic data -- including a drop in industrial production and consumer confidence on Friday -- suggests the Fed may be.
Elsewhere, benchmarks stock indexes in Singapore, Taiwan, mainland China and India closed higher. South Korea's Kospi fell 0.7 percent.
Benchmark oil for July delivery fell 25 cents to $83.66 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.29 cents to finish at $83.91 per barrel on the Nymex on Thursday.
In currencies, the euro rose to $1.2628 from $1.2600 late Thursday in New York. The dollar fell to 78.68 yen from 79.27 yen.