Asian shares up after France-Germany agreement

HONG KONG—Asian shares were mostly higher Monday after France and Germany announced an agreement to support Europe’s banks while US jobs data also supplied some unexpected good news.

Dealers remained cautious after Wall Street finished last week with a loss and Fitch downgraded Italy and Spain’s debt ratings.

Sydney closed 0.92 percent, or 38.1 points, higher at 4,201.0 after adding 3.8 percent last week – its biggest weekly gain in more than a year, while Seoul closed 0.38 percent, or 6.67 points, up at 1,766.44.

Singapore also closed higher, rising 1.06 percent at 2,668.30 points, while Hong Kong, which surged around nine percent in the previous two sessions, ended flat, edging up 4.05 points, to 17,711.06.

But Shanghai lost 0.61 percent, or 14.42 points, to close at 2,344.79 in the first trading day after the week-long Golden Week holiday.

Tokyo and Taipei were closed for public holidays.

French President Nicolas Sarkozy and German Chancellor Angela Merkel put on a united front after talks in Berlin on Sunday and vowed a response to Europe’s debt crisis within weeks.

Without announcing concrete details, Sarkozy said there would be “lasting, global and quick responses before the end of the month,” amid rampant fears of a crippling credit crunch.

The announcement comes a few weeks ahead of a G20 summit in Cannes, and Sarkozy said Europe must “arrive at the (meeting) united and with the problems resolved.”

It also came amid concerns that France and Germany, the two main powerhouses of the eurozone, were at odds over the best way to recapitalize the region’s banks.

Germany, the effective eurozone paymaster, wants banks that are under pressure to turn to investors for funds before appealing for national or European cash.

It wants the EU’s 440-billion-euro ($589-billion) European Financial Stability Facility (EFSF) bailout fund to intervene only as a last resort.

But France, fearful of losing its top-notch AAA credit rating, would rather dip into European funds than its own coffers.

However, Sarkozy said Sunday that “agreement is complete.”

“An economy is not prosperous without stable and reliable banks,” he told reporters after the talks.

Merkel also said the two sides had “decided on doing what is necessary to recapitalise (the) banks in order to assure the granting of credit to the economy”.

Also on Sunday, Belgium and Luxembourg said they had reached a deal to dismantle troubled bank Dexia, the first victim of the eurozone crisis.

Belgium’s finance minister said Brussels had, in accordance with French wishes, agreed to guarantee 60 percent of the so-called “bad bank” assets, compared with 36.5 percent for France and 3.5 percent for Luxembourg.

The news from Europe added to upbeat data from the United States, which showed the economy created a better-than-expected 103,000 net nonfarm jobs in September.

The Labor Department also revised upward the two previous months’ job creation numbers, indicating that employment in the faltering economy had more momentum than previously believed.

The July net new payrolls totalled 127,000, not the 85,000 initially estimated, while August was revised from zero to 57,000.

However, Wall Street dipped Friday after a three-day winning streak.

The Dow shed 0.18 percent, the S&P 500 fell 0.82 percent and the Nasdaq lost 1.10 percent.

Wellington-based ANZ bank strategists said in a note: “Some optimists are hailing an end to the risk of recession for the US, but given this data is volatile and prone to large revisions, we’ll not make any significant judgments from one outturn.”

Putting downward pressure on markets was Fitch’s decision Friday to cut its ratings on Italy and Spain, citing the increasing pressure they face as the eurozone crisis makes it harder for them to raise cash.

“The downgrade reflects the intensification of the eurozone crisis that constitutes a significant financial and economic shock which has weakened Italy’s sovereign risk profile,” Fitch said.

European markets rose Monday with London’s FTSE 100 index adding 0.20 percent to 5,314.09 points in early trade, the Paris CAC 40 gaining 0.23 percent to 3,102.55 points and Frankfurt’s DAX 30 was up 0.17 percent to 5,685.72 points.

The single currency was at $1.3587 against the dollar, from $1.3375 late Friday in New York, and at 104.28 yen, from 103.10 yen.

The dollar was at 76.74 yen, from 76.73.

Crude prices were higher, with New York’s main contract, light sweet crude for delivery in November, rising $1.40 to $84.38 a barrel.

Brent North Sea crude for November delivery gained $1.17 to $107.05.

By 1100 GMT gold was at $1,663.70 an ounce, up from $1,653.97 at 1045 GMT on Friday.

In other markets:

— Indian shares jumped 2 percent, or 324.69 points, to 16,557.23.

Leading vehicle maker Tata Motors rose 7.4 percent to 170.55 while the third-largest software outsourcer Wipro rose 4.42 percent to 348.55. India’s top property firm DLF rose 4.74 percent to 228.8.

— Manila ended 0.78 percent, or 31.32 points, higher at 4,040.58.

SM Investments dipped 0.8 percent to 506 pesos, Alliance Global gained 2.8 percent to 9.40 pesos and Philippine Long Distance Telephone added 0.5 percent to 2,160 pesos.

— Indonesian shares 0.74 percent, or 25.40 points, to 3,451.05.

Car maker Astra jumped 1.4 percent to Rp 64,150, Bank Mandiri rose 4.2 percent to Rp 6,250 while Telkom fell 0.7 percent to Rp 7,200.

— Kuala Lumpur shares fell 0.21 percent, or 3.01 points, to end at 1,397.04.

Gamuda fell 2.3 percent to 2.95 ringgit, Genting lost 0.4 percent to 9.09 and RHB Capital shed 1.7 percent to 6.53. Malayan Banking gained 0.2 percent to 8.20 ringgit and Axiata Group added 0.6 percent to 4.82.

— Wellington closed 0.32 percent, or 10.61 points, lower at 3,372.85.

Telecom fell 1.5 percent to NZ$2.56.

— Bangkok rose 1.54 percent, or 14 points, to 923.17.

Banpu gained 18 baht to 556, while Siam Cement added 10 baht to 275.—Dow Jones Newswires contributed to this story