European stocks close up on hopes for crisis fix

KELVIN CHAN - Associated Press
Trader Richard John Newman, right, works on the floor of the New York Stock Exchange, Tuesday, Nov. 16, 2010 in New York. (AP Photo/Mary Altaffer)
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Trader Richard John Newman, right, works on the floor of the New York Stock Exchange, Tuesday, Nov. 16, 2010 in New York.

Stocks markets rose modestly Wednesday as investors hoped European Union officials would come up with a more definitive fix for the region's debt crisis and Britain's finance minister pledged support for Ireland as it struggles to fix its troubled banks.

The FTSE 100 index of leading British shares closed up 10.66 points, or 0.2 percent, to 5692.56 while Germany's DAX was up 36.83 or 0.5 percent to 6700.07. The CAC-40 in France rose 29.88, or 0.8 percent, to 3792.35.

In the U.S., the Dow Jones Industrial Average was up 1.52 points, or 0.02 percent, to 11,025.02 in midday trading while the broader Standard & Poor's 500 futures was up 3.61 points, or 0.3 percent, at 1,182.95.

Officials from the International Monetary Fund and the European Central Bank are heading for Dublin on Thursday to survey the situation with Ireland's troubled banks, which are at the center of the country's financial crisis .

Irish and European Union officials had vowed Tuesday to stabilize the banks to restore confidence in the wider 16-nation eurozone, but fell short of agreeing on a bailout.

Britain's Finance Minister George Osborne also offered help on Wednesday.

As he arrived for a meeting of finance ministers from the 27-member European Union, Osborne said his country "stands ready to support Ireland" in any way to stabilize its ailing banking system. Britain is not a part of the eurozone.

"While the talks in Ireland are likely to provide some breathing space, the underlying uncertainty remains a negative factor for the euro," BNP Paribas said in a research note.

Concerns that Ireland will be unable to pay the cost of rescuing its banks — which ran into trouble when the country's real estate boom collapsed — has worsened Europe's government debt crisis.

Markets have pushed up borrowing costs for other vulnerable nations such as Portugal and Spain and threatened to destabilize the common euro currency.

Pressure had been mounting for Ireland's government to take a bailout like the one that saved Greece from defaulting on its bonds in May. A euro750 billion ($1.01 billion) backstop stands ready from other countries that use the euro.

But Irish Finance Minister Brian Lenihan said there wouldn't be a decision on whether to request aid for the banks before the ECB and IMF officials make their trip.

"The Irish debt crisis has just continued to bumble along, though hopefully tomorrow it will be crystallized — a long overdue solution or compromise," said David Buik, markets analyst at BCG Partners.

U.S. stocks traded in a narrow range as investors seemed to shrug off the release of a monthly report showing that U.S. inflation crept up 0.2 percent, less than expected, and another that said housing starts fell sharply.

Asian stocks mostly fell on expectations China will raise interest rates again to tame inflation.

Speculation that China will take more steps to rein in its red-hot economy after inflation hit a 25-month high in October also kept markets in check. A state media report of a days old speech by Premier Wen Jiabao, the country's top economic official, saying the Cabinet is "drafting measures to suppress sharp rises of commodity prices" added to those expectations.

China's government said later in the day, after trading closed, that it will give poor families subsidies to help pay for food following a spike in prices.

The announcement comes after politically sensitive food prices jumped 10.1 percent in October, raising the threat of social tensions. The government also promised efforts to increase supplies of grain, vegetables and diesel fuel but stopped short of ordering direct price controls.

China's Shanghai Composite Index slid 1.9 percent to 2,838.86 and Hong Kong's Hang Seng dived 2 percent to 23,214.46.

Japan's Nikkei 225 stock average bucked the trend, gaining 0.2 percent to 9,811.66 as the dollar rose against the yen, boosting exporters.

Australia's ASX/S&P 200 dropped 1.6 percent to 4,624.30 and South Korea's Kospi fell l 0.1 percent to 1,897.11.

Elsewhere, markets in Taiwan, Thailand and New Zealand fell. Singapore, India, Indonesia and Malaysia were closed for holidays.

In currencies, the yen rose 0.1 percent to 83.21. The euro rose 0.4 percent to $1.3535.

Benchmark crude for December delivery was down 72 cents at $81.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.52, or 3 percent, to settle at $82.34 on Tuesday.