European, Asian stock markets rise

With US markets closed, stock markets in Europe, Asia shrug off turmoil in Egypt and rise

Associated Press

AMSTERDAM (AP) -- World stocks rallied Thursday, shrugging off worries over political turmoil in Egypt and a possible resurgence of Europe's sovereign debt crisis to focus on positive economic news from the U.S., where markets are closed for Independence Day.

Experts cited Wednesday's better than expected jobs figures from the U.S. for the upbeat tone. But they cautioned that headlines from two directions could quickly turn sentiment: from Egypt, where President Mohammed Morsi has been removed from office by the country's armed forces; and from Portugal, where the governing coalition looks shaky and earlier this week raised the specter of Europe's debt crisis returning to a boil.

Also, European Central Bank President Mario Draghi is due to answer questions from reporters in Frankfurt later in the day.

At mid-session, Britain's FTSE 100 index was up 0.9 percent to 6,288.19. Germany's DAX rose 0.6 percent to 7,879.79, and France's CAC 40 was up 0.8 percent to 3,729.63.

Earlier in Asia, Hong Kong's Hang Seng index was the strongest gainer, rising 1.6 percent to 20,468.67. China's Shanghai Composite rose 0.6 percent to 2,006.10.

Tokyo's Nikkei 225 bucked the trend, slipping 0.3 percent to 14,018.93, despite remarks from Bank of Japan Governor Haruhiko Kuroda that the country's economy is headed for recovery. The yen strengthened.

Mike McCudden, head of derivatives at Interactive Investor, noted that while physical exchanges are closed in the U.S., futures are still trading, and they indicate Wednesday's rally on the back of economic data has continued, with Dow Jones Industrial Index futures now trading above 15,000. The index closed at 14,988.50 Wednesday.

"Whether this can be sustained will clearly be reflected by what's happening on a global basis," he said in a note on markets. "The situation in Egypt remains hugely sensitive, whilst resurgent eurozone woes could knock sentiment, subject to comments stemming from today's ECB press conference."

The ECB is holding its monthly monetary policy meeting Thursday. While observers do not expect any rate change, they will be interested in Draghi's remarks, after strains in Portugal's governing coalition have led to a sharp rise in the country's bond yields.

"We expect that Draghi will adopt a dovish tone at today's press conference," said Rabobank currency strategist Jane Foley.

Investors around the world were also keeping a close watch on the oil price, which has passed $100 per barrel for the first time since May 2012 due to Wednesday's events in the Middle East: Egypt's military overthrew Morsi, the country's first democratically elected president, after he defied calls to resign despite the demands of millions of protesters.

Egypt is not an oil producer but its control of the Suez canal — one of the world's busiest shipping lanes, which links the Mediterranean with the Red Sea — gives it a crucial role in maintaining global energy supplies. Oil has eased somewhat from its Wednesday highs and was down 31 cents to $100.93.

Over the past few weeks, markets have sputtered amid speculation that the U.S. Federal Reserve might taper off its policy of buying $85 billion in bonds every month to keep interest rates low and encourage spending.

But Wednesday's news out of the U.S. was just right for stocks, analyst said: good enough to restore confidence that the U.S. economic recovery is continuing, but not strong enough yet for the Fed to pull back on stimulus.

"We have had a period of extreme volatility, and now we have some settling going on," said Lorraine Tan, director at Standard & Poor's equity research in Singapore. "I think there's a realization that the reaction may have been overdone."

Investors will be mindful of Friday's nonfarm payrolls data out of the U.S., the next piece of evidence in trying to parse what the Fed's next step is likely to be. The dollar was fairly steady against other major currencies.

The euro rose 0.1 percent to $1.3003. The dollar slipped 0.2 percent to 99.66 yen from 99.97 yen.

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Kay Johnson in Bangkok and Pan Pylas in London contributed to this report.

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