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Asian markets mostly up but Europe weighs

/ 11:01 AM January 18, 2012

HONG KONG – Asian markets were mostly higher in early trade on Wednesday, extending the previous day’s rally thanks to upbeat US and German data as well as successful bond auctions in Spain and Greece.

However, eurozone fears continued to cast a shadow while financial plays were weighed by disappointing earnings from banking giant Citi.


Tokyo gained 0.12 percent, Hong Kong added 0.45 percent, Shanghai climbed 0.51 percent and Sydney was flat while Seoul was 0.21 percent off.

Confidence was given a lift after investors bought up debt from Madrid and Athens just days after Standard & Poor’s downgraded nine of the region’s economies as well as the bailout fund set up to help stricken nations.

Spain’s borrowing costs plummeted in an auction of 12- and 16-month paper, allowing it to raise 4.88 billion euros with demand outstripping supply by more than three times.

And Greece said demand outstripped supply three times as it raised 1.625 billion euros in three-month debt — well above the original target of 1.25 billion euros — as the rate eased to 4.64 percent from 4.68 percent.

Buyers were able to take on a little more risk since the European Central Bank loaned nearly half a trillion euros at a rock-bottom rate to the region’s banks last month.

In Germany the ZEW think-tank’s expectations index showed that investor confidence has risen sharply in recent weeks, suggesting that Europe’s top economy remains resilient to the eurozone crisis.

And in the United States the Federal Reserve’s Empire State index of manufacturing activity in New York also showed a pick-up in January that widely topped expectations.

The positive news lifted Wall Street, where the Dow gained 0.48 percent, the S&P 500 added 0.36 percent and the Nasdaq was 0.64 percent higher.

However, despite the bond sales, Athens’ struggle to hammer out a deal with creditors to slash its liabilities continues to worry markets.


“Given that the issues about private sector involvement in Greek debt writedowns remains unsolved, risk of a disorderly default of Greece will likely curb the market rallies,” Credit Agricole strategist Kintai Cheung said in a note.

Financial stocks were also a drag after Citi said in New York that fourth-quarter profit fell to $1.2 billion, from $1.3 billion in the same period in 2010, while full-year earnings were a lower-than-expected $11.3 billion.

On forex markets the euro fetched $1.2744, compared with $1.2737 late Tuesday in New York while it was at 97.90 yen from 97.84 yen.

The dollar was flat, trading at 76.82 yen.

New York’s main contract, light sweet crude for delivery in February, gained 31 cents to $101.02 per barrel and Brent North Sea crude for March delivery was up 21 cents to $111.74.

Gold was at $1,647.00 an ounce at 0210 GMT, against $1,662.40 late Tuesday.

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