European, US Markets Eke Out Gains But Italy Lags

By Salon Staff

Published December 27, 2011 5:18PM (EST)

PARIS (AP) — Buoyant U.S. consumer confidence figures helped stock markets in Europe and on Wall Street eke out modest gains Tuesday in very light holiday trading but Italian shares dipped as the country's key borrowing rate ratcheted up to worrisome levels.

In the run-up to Christmas, investors have been cheered by a slew of upbeat U.S. economic indicators, particularly related to the crucial shopping season.

That continued Tuesday with the closely-watched survey into U.S. consumer confidence from the New York-based Conference Board. Its main Consumer Confidence Index rose almost 10 points to 64.5 from a revised 55.2 in November. That was above market expectations for a more modest rise to 60.

Though below the 90 level that indicates an economy on solid footing, the survey provided further evidence that the U.S. economy enjoyed a decent holiday shopping season. Economists watch the confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity.

"The consumer is sitting pretty in winter wonderland according to the Conference Board," said Andrew Wilkinson, an analyst at Miller Tabak & Co.

The figures helped cement the advance in markets in Europe and the U.S. and pushed oil prices back above $100 a barrel amid hopes of rising demand in the U.S.

In Europe, France's CAC-40 closed around a point higher at 3,103.11 while Germany's DAX was up 0.3 percent at 5,889.76. The FTSE index of Britain's leading shares remained closed.

On Wall Street, the Dow Jones industrial average was up 0.1 percent at 12,303 while the broader S&P 500 index rose by an equivalent rate to 1,267.

One market bucking the trend was Italy's FTSE MIB, which traded 1 percent lower as the yield on the country's ten-year bonds hovered around the 7 percent once again — a level that is considered unsustainable in the long run and eventually forced Greece, Ireland and Portugal to seek outside financial help.

Italy is the eurozone's third-largest economy and is considered to be too big to save under current bailout facilities. Mario Monti, the country's new premier got parliamentary approval last week for a big austerity package that is intended to save the country from financial disaster. Markets have grown increasingly fearful over the past few months that Italy will find it difficult to pay off its massive debts, which stand at around euro1.9 trillion ($2.5 trillion).

Despite ongoing worries over the spread of Europe's debt crisis to Italy, the euro was trading 0.1 percent higher too at $1.3064.

However, analysts said the euro could face some choppy waters over the coming couple of days as Italy prepares for a couple of bond auctions on Wednesday and Thursday.

"The euro is little changed as markets look ahead to Italian government debt auctions later this week, which are likely to set the tone for the single currency and the wider foreign exchange market," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank.

Markets took little notice of figures from the European Central Bank showing that Europe's banks parked a record euro411.8 billion ($538.2 billion) overnight at the bank on Monday.

Heavy use of the ECB's deposit facility has been a sign of distrust in interbank lending markets, as banks remain wary of lending to each other and prefer to hold it at low interest rates at the ECB. However, it can also rise and fall for technical reasons as banks adjust their liquidity requirements, especially in the run-up to the year-end.

The narrow ranges across stock markets reflect light holiday trading conditions. Markets in Europe and the U.S. were closed Monday and trading is expected to be light most of this week though there could be some year-end movements, particularly on Friday as investors look to lock in any gains they may have made.

Earlier in the day, Asian shares fell after a disappointing profit performance by Chinese companies and a warning that Japan faces "significant downside risks" due to Europe's debt problems. That warning came from a Finance Ministry representative at a November Bank of Japan meeting, the bank said Tuesday.

Tokyo lost 0.5 percent to 8,440.56 while Seoul's Kospi shed 0.8 percent to 1,842.02. Taipei, Singapore and Jakarta also declined. Hong Kong and Sydney were closed.

China's benchmark Shanghai index dropped nearly 1.1 percent to 2,166.21 after the country's government reported that profit growth slowed at its major industrial companies. Total profit in the January-November period rose 24.4 percent over a year earlier, down 0.9 percent from the growth rate for the first 10 months of the year.

Oil prices got a boost after the consumer confidence figures and benchmark crude for February delivery was up $1.22 to $100.90 per barrel in late morning trade in New York.


AP Business Writer Joe McDonald contributed to this report from Beijing.

Salon Staff

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