BANGKOK (AP) -- Expectations that the Federal Reserve will announce a new stimulus plan to help bring life to a lethargic U.S. economy boosted stock markets in Asia, where investors brushed off North Korea's latest test launch of a long-range rocket. But enthusiasm waned as trading began in Europe.
The Fed is widely expected to announce a new bond-buying program known as quantitative easing at the end of its two-day policy meeting that began Tuesday. That's because one Fed program that's intended to keep long-term borrowing rates down will expire at year's end.
Under the program, called Operation Twist, the Fed has been selling short-term securities and using the proceeds to buy longer-term securities in an effort to push down interest rates.
"There is some expectation" that the Fed will act, said Linus Yip, strategist at First Shanghai Securities in Hong Kong. "If that's not the case, there may be a market pullback."
The Fed has launched three rounds of quantitative easing since the financial crisis hit. The latest round began in September. Under it, the Fed is buying $40 billion in mortgage bonds each month.
Britain's FTSE 100 dipped 0.1 percent to 5,921.84. Germany's DAX eked out a slight gain to 7,594.71. France's CAC-40 fell 0.2 percent to 3,639.02.
Wall Street futures augured a lackluster session. Dow Jones industrial futures fell a slight two points to 13,276. S&P 500 futures shed less than a point to 1,430.70.
Stocks in Asia posted gains in spite of Pyongyang's successful launch of a long-range rocket early in the day. The action, condemned by the U.S., South Korea and Japan, is believed to have been a test of technology seen as crucial to advancing North Korea's nuclear weapons ambitions.
Despite the launch, Japan's Nikkei 225 index rose 0.6 percent to 9,581.46, its highest close since late April. Advances on the Nikkei were largely attributed to the yen's recent weakness against the dollar and the euro.
Hong Kong's Hang Seng added 0.8 percent to 22,503.3. South Korea's Kospi gained 0.6 percent to 1,975.44. Australia's S&P/ASX 200 added 0.2 percent to 4,583.80. Benchmarks in Singapore, Taiwan and Thailand rose; the Philippines and New Zealand fell.
Investors were also encouraged by a German business confidence survey released Tuesday. The ZEW indicator of economic sentiment defied expectations by rising to plus 6.9 points, from minus 15.7 in November. Markets had expected the index to remain mired in negative numbers. Germany's economy grew a modest 0.2 percent in the third quarter and expectations are for another weak quarter in the last three months of the year.
Among individual stocks, shares of Australian mining giant BHP Billiton rose 1 percent in Sydney after the company announced it has agreed to sell its stake in a proposed Australian gas project to Chinese state-owned energy producer PetroChina for $1.6 billion.
Wall Street stocks rose Tuesday as investors hoped U.S. leaders would eventually thrash out a budget deal needed to keep a slew of tax increases and spending cuts from hitting the world's largest economy. The longer a U.S. deal fails to emerge to avoid the so-called "fiscal cliff" of automatic tax increases and spending cuts at the start of next year, the more fidgety investors are likely to become.
Benchmark crude for January delivery was up 30 cents to $86.10 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 23 cents to close at $85.79 per barrel on the Nymex on Tuesday.
In currencies, the euro fell to $1.3000 from $1.3003 late Tuesday in New York. The dollar rose to 82.88 yen from 82.50 yen.
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