European Stocks Rise after Festive Break


Europe's main stock markets rose Thursday following the festive break and a rally in Tokyo, as traders focused on whether the United States would avert the 2013 "fiscal cliff" of sharp tax hikes and spending cuts.

In afternoon deals, London's FTSE 100 index of top companies was up 0.30 percent at 5,972.17 points compared with the close on Monday, its previous trading session.

The Paris CAC 40 added 0.79 percent to 3,681.31, also compared with Monday's close, while in Frankfurt the DAX 30 climbed 0.38 percent to 7,665.25 points compared with its previous trading session last Friday.

In foreign exchange deals, the euro rose to $1.3274 from $1.3223 late in New York on Wednesday. Gold prices declined to $1,655.25 an ounce on the London Bullion Market from $1,662.50 late on Monday.

On Wall Street, U.S. stocks edged lower in early trading as the deadline for the White House and Republican lawmakers to reach some kind of budget agreement crept closer.

The Dow Jones Industrial Average was down by just 0.02 percent while the broad-market S&P 500 nudged down 0.05 percent and the tech-rich Nasdaq Composite lost 0.16 percent.

"There are hopes for an 11th hour grand bargain to be bashed out later tonight, but markets are likely to hold off from building too much risk in the case of failure which appears to be much more likely," noted ETX Capital economist Ishaq Siddiqi.

Investors fretted over the looming deadline for a series of tax hikes and spending cuts worth some $600 billion (452 billion euros) due to take effect in January.

U.S. lawmakers were to return to the negotiating table after the Christmas holidays in a last-ditch effort to reach a deal, with experts warning that going over the widely-signaled cliff could drive the world's biggest economy back into recession.

"No deal tonight will mean the increased likelihood that U.S. lawmakers will have to reach some sort of make-shift solution before the year ends and address the issue with a more comprehensive plan in January," Siddiqi said.

On Wednesday, the Treasury Department said the government would hit its legal borrowing limit by Monday, setting in motion emergency measures to keep the government operating for several more weeks.

The Treasury's maneuvering is designed to put off until February or March the prospect of a full-blown debt crisis, indicating that the U.S. budget wrangling could continue well into 2013.

Asian stock markets closed higher on Thursday, with Tokyo scaling a 21-month high thanks to a weaker yen, traders said.

Tokyo's benchmark Nikkei 225 index climbed 0.91 percent to 10,322.98 points, the highest level since March 11 last year when a massive quake struck Japan, sparking a tsunami and the worst atomic crisis in a generation.

The dollar rose to its highest level in more than two years against the yen as Prime Minister Shinzo Abe took office, raising expectations that the Bank of Japan would initiate more aggressive monetary easing under his leadership.

A weaker yen boosts Japan's exporters, helping to lift their share prices.

Europe's main stock markets have meanwhile enjoyed strong gains over the year, largely thanks to a late 2012 rally on signs that the eurozone debt crisis was being tackled effectively.

Frankfurt has surged almost 30 percent this year, while Paris has gained 16 percent and London seven percent in value.

In a reminder however that deep problems remain, shares in Spain's bailed-out lender Bankia plunged on Thursday after banking authorities said it had a negative of value of 4.148 billion euros ($5.5 billion).

Shares in Bankia, which is at the heart of a crisis in the bad-loan ridden Spanish banking system, slumped 14.87 percent to 58.40 cents in afternoon trade.

Madrid's main IBEX 35 index was essentially unchanged at 8,300.10 points. Spain's stock market has fallen by about 3.0 percent since the start of the year.

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