Markets closing out tough month with solid gains

Currency traders work under a screen indicating the exchange rate, above, of the euro against Japanese yen and the Nikkei 225 index, at a money brokerage in Tokyo, Wednesday, May 30, 2012. Investors unnerved by Spain's worsening financial condition and a report that China has no plans for a major economic stimulus dragged Asian stock markets lower Wednesday. Japan's Nikkei 225 index fell 0.9 percent to 8,581.53 as Europe's troubles sent the yen higher against the euro. That hurts Japanese exporters by making their goods more expensive. (AP Photo/Shizuo Kambayashi)

LONDON (AP) — Global stocks recovered their poise Thursday, though ongoing unease over Europe's crisis and a run of weaker than anticipated U.S. economic data kept sentiment in check on the last day of a month that has seen renewed turmoil across all financial markets.

Over the past month, the financial and political problems afflicting Greece, Spain and the 17-country eurozone as a whole have weighed heavily on world markets. U.S. stocks are set to suffer their first negative month since last summer, oil prices have slid and the euro has fallen to a near two-year low against the dollar.

"As we round off the worst monthly performance since last August, equities are marginally higher," said Mike McCudden, head of derivatives at Interactive Investor. "However, in the absence of decisive action to stem the rot in the eurozone sellers should reconvene soon enough."

In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 5,322 while Germany's DAX rose 0.1 percent to 6,287. The CAC-40 in France was 0.2 percent higher at 3,021.

Wall Street was set to rise on the open with both Dow futures and the broader S&P 500 futures up 0.2 percent after a fairly mixed batch of U.S. economic data.

The ADP payrolls firm reported that private employers added 133,000 jobs in May, slightly below market expectations, while weekly jobless claims figures from the government reported a 10,000 increase. U.S. economic growth in the first quarter was also revised down, as anticipated, to an annualized rate of 1.9 percent from the previously reported 2.2 percent.

The debt crisis in Europe will likely remain the main focus of attention in the markets in the weeks ahead, not least because Greece goes to the polls again in a general election that is widely-viewed as a referendum on the country's continued use of the euro.

Though opinion polls show that four in five Greeks want to retain the euro, others show that there's a split in support for parties that support the country's international bailout commitments and those that don't. The worry in the markets is that the anti-austerity parties will win, prompting a halt in Greece's bailout, which could lead to its bankruptcy and eventual exit from the eurozone.

Though Greece is the epicenter of the debt crisis, Spain has been a growing source of worry over recent weeks. Its banking system is under the microscope, especially after Bankia, the country's fourth-largest lender, last week announced it needed €19 billion ($23.8 billion) in state aid.

Investors are worried that Bankia's woes might be replicated across Spain's banking sector, which has suffered badly from the collapse of the construction sector. An economic recession and unemployment at almost 25 percent are fueling concern that the country will become the fourth euro country to be bailed out after Greece, Ireland and Portugal.

The problem for the eurozone is that Spain's economy alone is double the size of the three countries already bailed-out, and investors are skeptical whether a rescue operation can be mounted. The yield, or interest rate, on Spain's ten-year bond is around the 6.5 percent mark, and not far from the 7 percent threshold that is considered to be unsustainable in the long-run and eventually forced the other three bailouts.

Increasing numbers of experts say that the euro, in its current form, cannot survive.

"We may just be approaching the endgame where either the eurozone and/or the European Central Bank takes action to stem the bleeding or the whole thing collapses, with the trigger point being the trend in Spanish bond yields," said Gary Jenkins, managing director of Swordfish Research.

Ireland will hold a referendum on Thursday to decide whether the country should adopt Europe's newly-agreed fiscal treaty to put tough controls on governments' budget spending. The referendum is expected to approve the treaty, but similar polls were proved wrong when Ireland voted to reject the EU's last two treaties in 2001 and 2008.

A "no" vote would mainly damage Ireland itself, because its existing loans will run dry by the end of 2013 - and the treaty restricts future access to the EU's rescue fund to those nations that accept the new budget rules. Other eurozone countries would still be able to adopt the treaty even if Ireland rejects it.

In the currency markets, the euro recouped some recent losses, trading 0.2 percent higher at $1.24. On Wednesday, Europe's single currency fell to $1.2368, its lowest level since July 2010.

Earlier, Asian stocks fell sharply, tracking developments in Europe and the U.S. the previous day.

Japan's Nikkei 225 index tumbled 1.1 percent to close at 8,542.73, its lowest finish since mid-January. Hong Kong's Hang Seng lost 0.3 percent to 18,629.52 and South Korea's Kospi was down marginally at 1,843.47.

Oil prices remained under pressure amid the concerns over the global economy, with benchmark oil for July delivery down 23 cents at $87.59 per barrel in electronic trading on the New York Mercantile Exchange.


Pamela Sampson in Bangkok contributed to this report.