World stocks rise

REUTERS

A bull and a bear styrofoam figurine.

World stock markets rose Friday amid expectations that central banks will act to prevent the outcome of Greece's election this weekend from destabilizing the global economy.

Investors have been on edge as Greece's election draws near because parties opposed to the terms of the country's financial bailout could take control of the government. If that happens and the country leaves the euro, many fear the currency union could be torn apart and European banks could fail.

Another flash point is Spain, which faces a two-pronged crisis:

financially feeble banks in need of cash injections from outside, and soaring borrowing rates due to investor reluctance to purchase its bonds.

Spanish Prime Minister Mariano Rajoy has asked EU leaders to push the European Central Bank to restart a program of Spanish bond purchases that helped ease the country's borrowing rate last fall.

But the ECB has been reluctant to intervene. The bank is forbidden by treaty from taking instructions from politicians and is opposed to flooding the economy with money to push down interest rates the way the Fed has.

Still, as Spanish banks and Greece's economy teeter toward insolvency, the ECB may have little choice, according to Francis Lun, managing director of Lyncean Holdings in Hong Kong.

“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,” he said. “I think maybe the worst is over. I think we have reached the nadir. Finally they have been pushed to do something.”

European shares rose in early trading. Britain's FTSE 100 added 0.8 percent to 5,508.26 while Germany's DAX gained 0.7 percent to 6,182.20. France's CAC-40 rose 0.8 percent at 3,056.46.

Wall Street was on course to open higher, with Dow Jones industrial futures rising 0.4 percent to 12,650. S&P 500 futures gained 0.4 percent to 1,331.30.

The gains came on top of those in Asia earlier in the day. Japan's Nikkei 225 index was essentially unchanged at 8,569.32, but Hong Kong's Hang Seng jumped 2.3 percent to 19,233.94.

Australia's S&P/ASX 200 rose 0.4 percent to 4,057.30. Benchmarks in Singapore, Taiwan, mainland China and India were also higher. South Korea's Kospi fell 0.7 percent to 1,858.16.

Meanwhile, a US employment indicator Thursday led investors to speculate that the US Federal Reserve was preparing to pump more money into the economy to breathe life into its slackening recovery. The Labor Department said unemployment benefit applications rose 6,000 to 386,000 last week, a sign that hiring remains slow.

“A bigger-than-expected result for unemployment claims and a benign inflation reading saw investors speculate the Fed might conduct some easing to spur growth,” Stan Shamu of IG Markets in Melbourne said in a market commentary.

Analysts have said they expect the Fed might renew its “Operation Twist” program under which it sells shorter-term securities and buys longer-term bonds to keep their rates down. The current program expires at the end of June.

The Fed has also done two rounds of bond purchases to try to lower long-term interest rates and encourage borrowing and spending.

Among Hong Kong-listed stocks, China Railway Group rose 3.7

percent and China Railway Construction Corp. added 2.7 percent.

Battered retailer Esprit, whose chairman and CEO resigned this week, gained 9.9 percent after two days of sharp drops. The company is struggling to execute a turnaround amid weakness in Europe, its biggest market, and growing popularity of rival chains.

South Korean high-tech shares stumbled. Samsung Electronics tumbled 3.5 percent and SK Hynix fell 2.1 percent. LG

Benchmark oil for July delivery rose 76 cents to $84.67 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 $1.2631 from $1.2600 late Thursday in New York. The dollar fell to 78.92 yen from 79.27 yen. - Sapa-AP