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Asian shares rise as Europe announces debt plan

/ 11:49 PM October 27, 2011

HONG KONG—Asian markets surged on Thursday as European leaders announced a deal to tackle the region’s crippling debt crisis, easing worries about a fiscal meltdown plunging the world economy into a recession.

News of the last-ditch deal also sent European markets soaring in early trade and the euro to a seven-week high against the dollar, while drawing applause from Beijing and Tokyo.

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Japan said it would take the “necessary measures” to help stabilize the eurozone to protect its own economy, amid reports China and other top emerging economies planned to helped finance the region’s beefed-up bailout fund.

After 10 hours of painstaking talks in Brussels, banks holding some of Greece’s mountain of debt agreed to take a 50 percent “haircut” on their holdings, breaking a deadlock many hope will help end the two-year-old crisis.

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The summit also established a fresh Greek bailout and a deal that will force lenders to increase their defenses against losses on the debt writedown, while more than doubling a rescue fund aimed at protecting other eurozone economies.

Tokyo jumped 2.04 percent, or 178.07 points, to 8,926.54, Seoul added 1.46 percent, or 27.73 points, to 1,922.04, and Sydney closed 2.49 percent, or 105.7 points, stronger at 4,348.2.

Hong Kong rallied 3.26 percent, or 622.16 points, to 19,688.70, while Shanghai ended 0.34 percent, or 8.13 points, up at 2,435.61.

Sydney was closed for four hours soon after opening due to a technical glitch.

French President Nicolas Sarkozy said after the talks: “I think the result will be welcomed with relief by the entire world that was waiting for strong decisions from the eurozone. I believe we have those decisions.”

The agreement by holders of Greek bonds to accept a 50 percent loss on their investment – more than double the 21 percent they agreed to at a summit in July – will slash 100 billion euros ($140 billion) from the 350 billion euros that Greece owes.

Lenders agreed to the move after German Chancellor Angela Merkel and Sarkozy broke off from long-running talks to speak directly to the head of the banking lobby.

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There were fears that a deal would not be struck as banks held out for a 40 percent loss but they eventually agreed to the bigger writedown.

Convincing banks to erase billions in Greek debt is a key part of a grand deal leaders had pledged to deliver, along with the bank recapitalization and beefed-up rescue fund.

The lenders had earlier agreed to a recapitalization to protect themselves against a Greek writedown.

The declaration on recapitalization, which came after a meeting of all 27 European Union members, lacked any details but sources said it would amount to 108 billion euros.

That had been contingent only on a full package being agreed to protect the euro.

Soon after the talks wrapped up, Sarkozy announced that the European Financial Stability Facility (EFSF) rescue fund would be increased to one trillion euros from the 440 billion agreed to in July.

The EFSF, the main weapon against the crisis, has already been used to help Portugal and Ireland, and would be tapped in a new Greek rescue. However, it would be too small for bigger endangered economies, such as Italy and Spain.

Global powers, from the United States to Japan and China, had been pressing European leaders to come up with a lasting solution to the debt crisis before a G20 summit in France on November 3 and 4.

The crisis has sent markets spinning amid fears that it could spill over on to the global economy and lead to another financial meltdown.

In Tokyo, Olympus shares surged more than 22 percent, one day after the camera maker’s under-pressure chairman and president resigned over a fee payments scandal.

The firm had lost more than 50 percent of its value since the sacking earlier this month of its British chief executive after he raised doubts over advisory fees tied to a series of buyouts.

In morning deals, London’s benchmark FTSE 100 index jumped 2.11 percent to 5,670.32 points, Frankfurt’s DAX 30 soared 3.61 percent to 6,231.79 points and in Paris the CAC 40 rallied 3.73 percent to 3,288.04 points.

On currency markets, the euro stood at $1.4013 in London deals compared with $1.3908 late in New York on Wednesday, while it bought 106.35 yen from 106.42 yen.

The dollar was flat at 75.89 yen, after hitting a fresh post-World War II low of 75.71 yen in New York on Wednesday.

New York’s main contract, light sweet crude for delivery in December, gained 48 cents to $92.35 per barrel.

Brent North Sea crude for December delivery added 71 cents to $110.85.

By 1105 GMT, gold was up at $1,720.39 an ounce, against $1,717.35 earlier Thursday.

In other markets:

— Taipei rose 0.39 percent, or 29.39 points, to 7,565.21.

Hon Hai rose 0.62 percent to Tw$80.9 while HTC was 0.58 percent higher at Tw$691.0.

— Manila closed 1.01 percent, or 42.74 points, higher at 4,267.50.

Philippine Long Distance Telephone added 2.5 percent to 2,388 pesos while Metropolitan Bank and Trust rose 1.7 percent to 69.05 pesos.

— Wellington closed 0.20 percent, or 6.50 points, higher at 3,303.47.

Fletcher Building rose 2.5 percent to NZ$6.61 and NZ Oil & Gas surged 7.7 percent to NZ$0.70.

— Kuala Lumpur shares gained 0.90 percent, or 13.13 points, to end at 1,470.93.

Budget carrier AirAsia climbed 1.06 percent to 3.93 ringgit, while UEM Land Holdings added 8.04 percent to 2.15 ringgit. Gaming giant Genting lost 1.06 percent to 3.73 ringgit.

— Indonesian shares rose 1.99 percent, or 74.39 points, to 3,813. Aneka Tambang gained 4.68 percent to Rp 1,790, Astra Agro Lestari rose 5.15 percent to Rp 21,450, Sinar Mas Agro Resources gained 7.44 percent to Rp 6,500, while PT Timah rose 4.76 percent to Rp 1,980.

— Bangkok added 2.29 percent, or 21.49 points, to close at 960.17.

Banpu rose 16 baht to 614, while Siam Cement gained 2 baht to 314.

Singapore’s Straits Times Index closed up 2.80 percent, or 77.63 points, to 2,847.57.

Noble Group added 9.46 percent to 1.62 and Olam International rose 8.75 percent to 2.61.

— Mumbai was closed for a public holiday.—Dow Jones Newswires contributed to this story

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