Asian markets up on report of IMF help for Italy

HONG KONG – Asian markets and the euro rose on Monday following a report that the International Monetary Fund was considering a plan to hand debt-ridden Italy a $800 billion bailout.

Traders were also cheered by news that Germany and France had discussed plans to speed up integration in the eurozone, providing officials with greater powers to enforce fiscal discipline.

Tokyo rose 1.77 percent by the break, Hong Kong added 1.75 percent, Sydney was 1.71 percent higher, Seoul gained 1.89 percent and Shanghai climbed 0.12 percent.

Italy’s La Stampa newspaper said on Sunday that the IMF could provide up to 600 billion euros to help Rome service its huge repayments.

The cash would give Prime Minister Mario Monti 12 to 18 months to implement urgent budget cuts and growth-boosting reforms “by removing the necessity of having to refinance the debt”, the paper said, citing fund officials.

La Stampa added that the IMF would guarantee rates of four or five percent on the loan — far better than the yields above seven percent Italy has to pay on commercial markets.

“One of the big concerns about Italy was all the refinancing it has to do and all the (bond) maturities it’s got in the next 12 months and if the rumor is true, then obviously that is going to alleviate some of the stress around that,” analyst Brad Gordon told Dow Jones Newswires.

The report provided a boost to the euro, which rose to $1.3313 in early Asian trade from $1.3240 late Friday in New York, while it was at 103.34 yen from 102.90 yen. The dollar edged down to 77.63 yen from 77.72 yen.

Sentiment was also given a lift by a separate report that German Chancellor Angela Merkel and French President Nicolas Sarkozy are considering a new stability treaty that would be limited to only a few countries in the eurozone.

The two European giants on Sunday discussed methods of imposing tighter budget controls over eurozone nations via a zonal agreement or a separate compact outside of the European Union treaty involving eight to ten nations, news reports quoted EU sources as saying.

The two leaders were expected to propose the plan ahead of a December 9 European Union summit.

The weekend’s reports provided some relief to markets, which have been sent sprawling in recent weeks on fears the eurozone is on the verge of collapse as nations such as Italy, Greece and Spain struggle under mountains of debt.

New York’s main contract, light sweet crude for delivery in January, gained $1.63 to $98.40 per barrel.

Brent North Sea crude for January rose $1.20 to $107.60.

Gold was trading at $1,706.60 an ounce by 0200 GMT, from $1,677.35 late Friday.