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G-20 approval of Japan's easing drives markets up

Sarah Dilorenzo, AP Business Writer

People walk by an electronic stock board of a securities firm showing Japan's benchmark Nikkei stock exchange surged 261.88 to 1,578.36 in Tokyo Monday, April 22, 2013. Asian markets traded higher Monday, with Tokyo stock markets heading close to a five-year high after a meeting of global finance leaders lent support to Japan's aggressive monetary policy. The Nikkei index rose after a statement by finance ministers and central bank presidents from the world's biggest economies appeared to give its blessing to aggressive credit-easing moves pushed by Japanese Prime Minister Shinzo Abe, saying they were intended to stop prolonged deflation and support domestic demand. (AP Photo/Koji Sasahara)

PARIS (AP) -- A global stamp of approval for Japan's aggressive monetary policy and the re-election of the Italian president pushed world stocks higher Monday.

Upending expectations, finance ministers and central bank governors from the world's largest economies gave their blessing this weekend for Japan's monetary easing, which has driven the value of the yen against the dollar down more than 20 percent since October.

That sent Japan's Nikkei 225 index to its highest close in nearly five years, encouraging other stock markets to follow suit.

European investors were also relieved to see that Italy had re-elected the widely respected Giorgio Napolitano to the presidency, ending weeks of uncertainty. But analysts cautioned the solace could be short-lived.

In afternoon trading in Europe, the FTSE index of 100 leading British shares ended the day up 0.3 percent at 6,305. France's CAC-40 was flat at 3,652, and Germany's DAX added 0.2 percent to 7,478.

EU statistics showed government deficits across the 17-country eurozone declined in 2012. However, the figures also showed deficits rose in countries imposing the toughest austerity measures, such as Greece, Spain and Portugal.

Sebastien Galy of Societe Generale cautioned that the good mood in markets may not last long. In Europe, the results of the Italian election may pave the way for an unstable coalition government, shaking confidence again.

"A coalition government, born more out of political necessity than a popular mandate, is unlikely to be able to pursue the necessary structural reforms to the Italian economy, and is also likely to be short-lived," said Galy.

He advised clients to be wary of the euro. The single currency fell 0.03 percent against the dollar Monday to $1.3048.

Wall Street was largely in a holding pattern Monday, ahead of the publication of earnings of several U.S. companies this week. The Standard & Poor's index was up slightly, 0.16 percent, at 1,557, while the Dow Jones industrial average was off 0.2 percent at 14,521.

Earlier in Asia, the Nikkei closed 1.9 percent higher at 13,568.37. South Korea's Kospi added 1 percent to 1,926.31, and Hong Kong's Hang Seng closed 0.1 percent higher at 22,044.37. Australia's S&P/ASX 200 rose 0.7 percent to 4,966.60. Shares in mainland China were mixed.

Oil was also buoyed by the enthusiasm. Benchmark crude for May delivery was up 58 cents at $88.85 per barrel in electronic trading on the New York Mercantile Exchange.

The decline of the yen has stirred up concerns among Japanese exporters' key rivals, such as the U.S. and South Korea that Japan's real goal is to weaken the yen as a way to gain trade advantages. But officials at the G-20 meeting were reluctant to voice any opposition to the Bank of Japan's monetary stimulus program.

Other countries may now feel free to rein in their own currencies.

"The rapid weakening of the yen, as a direct result of the ultra-loose monetary policy, has led to suggestions that the BoJ (Bank of Japan) would be warned about future easing, which could prompt other central banks to act in order to limit the appreciation of their own currency," said Craig Erlam, a market analyst with Alpari Research.


Associated Press Business Writer Youkyung Lee in Seoul, South Korea, contributed to this story.