MILAN (AP) — A deal to get the 17 countries that use the euro to tie their economies closer together has got a modest level of support in the markets Friday, even though European Union leaders failed to reach unanimity on the plan.
Though the 17 were joined by six other prospective euro members in agreeing a fiscal union, Britain, and three others refused to join in. The 23 countries that are backing closer ties will now move on and craft out a new treaty that will penalize budgetary offenders in the hope that a repeat of Europe's debt crisis does not happen again.
Germany and France, the two biggest economies in the eurozone, had hoped to persuade all 27 members of the European Union to back a change to the EU treaty that would impose tight fiscal rules on its members.
Following losses in Asia and an early retreat in Europe, market concerns appear to have dissipated somewhat.
In Europe, Germany's DAX was up 1.5 percent at 5,961 while the CAC-40 in France rose 1.4 percent to 3,137. The FTSE 100 index of leading British shares was 0.6 percent higher at 5,516. The euro was also trading 0.5 percent higher at $1.3413.
Wall Street was poised for gains at the open too — Dow futures were up 0.7 percent at 12,031 while the broader Standard & Poor's 500 futures rose 0.8 percent at 1,240.
Investors though will be careful not to get too carried away — after all, previous European agreements to stem its crippling debt crisis have all been greeted with euphoria only to be met with skepticism soon after.
"An all-mighty sell-off in the markets is brewing," said Nicholas Spiro of Spiro Sovereign Strategy. "EU leaders have patently failed to deal with the issue that investors care most about: shoring up eurozone sovereign debt."
Many think that a solution to the debt crisis can only come if the European Central Bank takes a more active role, possibly by buying up more government debt in the markets. It currently buys bonds in the markets, but only reluctantly, and in small quantities.
On Thursday, the European Central Bank's president Mario Draghi suggested he had no intention of increasing bond purchases after the bank delivered on market expectations to reduce its main interest rate by a quarter percentage point to 1 percent.
Draghi said he was surprised by some interpretations of his comments last week that "additional steps" would be taken if the 17 countries that use the euro agreed to closer budget controls. Germany and France have proposed a plan on closer fiscal unity that will dominate debate at the EU summit of leaders, which starts later Thursday.
Earlier in Asia, stocks had been weighed down by an early cautious response to the deal.
Japan's Nikkei 225 fell 1.5 percent to close at 8,536.46 while South Korea's Kospi sank 2 percent to close at 1,874.75. Hong Kong's Hang Seng tumbled 2.7 percent to end at 18,586.23.
Mainland Chinese shares fell less than other Asian markets after inflation data for November fell to a less-than-expected 4.2 percent. The benchmark Shanghai Composite Index retreated 0.6 percent to close at 2,315.27, while the Shenzhen Composite Index lost 0.9 percent to finish at 961.81.
Oil prices were fairly subdued — benchmark oil for January delivery fell 8 cents to $98.71 a barrel in electronic trading on the New York Mercantile Exchange.
Kelvin Chan contributed from Hong Kong.