BANGKOK (AP) -- Signs that U.S. political leaders may be closing in on a budget deal to avoid the so-called "fiscal cliff" boosted world stock markets Thursday.
Comments by President Barack Obama and Speaker of the House John Boehner that a deal to avoid a budget crisis could be reached before year's end was enough to boost markets in the face of disappointing U.S. home sales, a critical indicator of whether the economy is improving.
European stock markets opened higher. Britain's FTSE 100 rose 0.4 percent to 5,826.96. Germany's DAX advanced 0.5 percent to 7,382.93. France's CAC-40 added 0.7 percent to 3,538.65.
Wall Street also appeared headed for a session of gains. Dow Jones industrial futures rose 0.6 percent to 13,030. S&P 500 futures were up 0.6 percent at 1,416.10.
Earlier, Japan's Nikkei 225 index rose 1 percent to close at 9,400.88. Hong Kong's Hang Seng jumped 1 percent to 21,922.89 and South Korea's Kospi added 1.2 percent to 1,934.85. Australia's S&P/ASX 200 gained 0.7 percent to 4,477.70. Benchmarks in Singapore, Taiwan and New Zealand also rose.
But mainland Chinese stocks extended their slump to a fourth day. The Shanghai Composite Index lost 0.5 percent to 1,963.49, the lowest closing since Jan. 16, 2009. The smaller Shenzhen Composite Index lost 1 percent 743.43.
"Investors are getting more and more pessimistic towards the market after recent losses," said Peng Yunliang, a Shanghai-based analyst.
Obama and the U.S. Congress have until Jan. 1 to agree on how to trim the country's unwieldy deficit. Otherwise, a series of automatic tax increases and sharp spending cuts will take effect that could drag the world's No. 1 economy into recession. Obama said Wednesday he believes a "framework" for an agreement can be reached before Christmas.
"It's really a headline market at the moment. We'll probably continue to see headlines on the fiscal cliff supersede any economic data until it is resolved," said Stan Shamu of IG Markets in Melbourne. "The longer it stretches out, the more risk there is that it will cause further volatility in the markets. But for now, it seems markets are on the right track."
Among Japanese stocks, Nakayama Steel Works soared 55 percent after a Nikkei business daily reported the company will seek restructuring and loan waivers from banks. Kobe Steel gained 6.9 percent. Export-dependent shares also rose, including Yamaha Motor Co., up 3.6 percent; and Honda Motor Co., up 2 percent.
Hong Kong-listed property shares also posted solid gains, including Evergrande Real Estate Group, which jumped 6.6 percent.
Concern that the U.S. will go over the fiscal "cliff" has weighed on stocks since the Nov. 6 elections returned a divided government to power, with Obama staying in the White House and Republicans retaining control of the House of Representatives.
U.S. sales of new homes fell slightly in October, down 0.3 percent to a seasonally adjusted annual rate of 368,000. The government also said Tuesday that September sales were slower than initially reported.
In Europe, sentiment improved this week after Greece's bailout creditors agreed to pay its next installment of loans and outlined a series of measures to lower its debt load over the coming decade. Concerns remain, however, over the country's economy, which is expected to enter a sixth year of recession in 2013.
Benchmark oil for January delivery was up 44 cents to $86.95 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 69 cents to close at $86.49 per barrel on the Nymex on Wednesday.
In currencies, the euro rose to $1.2976 from $1.2932 late Wednesday in New York. The dollar rose to 82.15 yen from 81.90 yen.
Follow Pamela Sampson on Twitter at https://twitter.com/pamelasampson
AP researcher Fu Ting contributed from Shanghai.