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World stocks up on Merkel call for EU changes

By Pamela Sampson
AP Business Writer / December 2, 2011
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BANGKOK—World stocks rose Friday as markets unnerved by an escalating eurozone debt crisis welcomed German Chancellor Angela Merkel's call for changes to the European Union treaty to enforce stern fiscal discipline.

Benchmark oil approached $101 per barrel while the dollar fell against the euro but rose against the yen.

European shares were solidly higher in early trading. Britain's FTSE 100 rose 1.8 percent to 5,585.88 while Germany's DAX jumped 1.8 percent to 6,145.06. France's CAC-40 climbed 2 percent to 3,192.92.

Wall Street also appeared headed for gains. Dow Jones industrial futures rose 1 percent to 12,126 and S&P 500 futures gained 1.1 percent to 1,257.80.

The gains came on the heels of momentum from Asia earlier in the day. Japan's Nikkei 225 index rose 0.5 percent to end at 8,643.75, its highest closing in three weeks. Hong Kong's Hang Seng rose 0.2 percent to 19,040.39. Australia's S&P/ASX 200 added 1.4 percent to 4,288.

South Korea's Kospi was marginally down at 1,916.04, and mainland Chinese shares also lost ground as investors cashed in on earlier gains. The benchmark Shanghai Composite Index lost 1 percent to 2,362.17. The smaller Shenzhen Composite Index lost 1.9 percent to 994.54.

In a highly anticipated speech to Germany's parliament, Merkel said the 17 nations that use the euro currency must urgently move to restore market confidence. She also previewed the strategy that she will present at an upcoming emergency EU summit.

She added that eurozone financial regulations had been violated too frequently and that EU treaty changes and stricter financial controls were needed. She also reiterated her objection to so-called eurobonds, debt jointly backed by multiple eurozone countries.

"The German government has made it clear that the European crisis will not be solved in one fell swoop," she said. "It's a process, and this process will take years."

Merkel and French President Nicolas Sarkozy are due to meet Monday to discuss the treaty changes that can restore confidence in the euro's future. The talks will culminate in a Dec. 9 summit of EU leaders, where the proposals are expected to be debated and detailed.

On Wednesday, the U.S. Federal Reserve, European Central Bank, Bank of England and the central banks of Canada, Japan and Switzerland said they were working together to make it easier for banks to borrow dollars.

The coordinated effort was meant to prevent Europe's debt crisis from exploding into a global panic. Should a European bank fail or if a country default on its debt, investors fear it could result in a freeze-up in global lending like the one that occurred in 2008 when Lehman Brothers collapsed.

China's central bank also acted to release money for lending and to shore up growth by lowering bank reserve levels for the first time in three years. The bank actions caused global stocks to rally Thursday.

Linus Yip, a strategist at First Shanghai Securities in Hong Kong, said the huge boost to markets on Thursday led some investors to cash in shares for profits Friday.

"We had a big gain yesterday. The Hang Seng gained about 1,000 points, so for today maybe it is reasonable to consolidate," Yip said.

Gambling shares were among those being sold off. Hong Kong-listed Wynn Macau lost 5.4 percent and SJM Holdings Ltd. fell 3.4 percent.

The Shanghai Composite Index, meanwhile, was pulled lower by a decline of nearly 3.5 percent in Shanghai's U.S. dollar and HK dollar-denominated "B share" market.

Shanghai-listed Huaneng Power International, one of the several big electricity generators, lost 5.9 percent while An Hui Wenergy Co. plunged 10 percent.

South Korea's Samsung Electronics fell 2.2 percent after Australia's highest court temporarily extended a ban on sales of the company's Galaxy tablet computers in the country. The case stems from a suit by Apple that accuses Samsung of copying the iPad and iPhone and violating Apple's patents.

Another rise in applications for weekly U.S. unemployment benefits dampened the mood on Wall Street on Thursday.

The Dow Jones industrial average fell 0.2 percent to close at 12,020.03. The S&P 500 index slipped 0.2 percent to 1,244.59. The tech-heavy Nasdaq inched up 0.2 percent to 2,626.

The Labor Department said initial applications rose to 402,000 last week, the second weekly increase in a row. The figures didn't change expectations for the government's monthly labor report, which comes out Friday. Economists forecast that the unemployment rate will remain at 9 percent.

Traders also got little encouragement from a better manufacturing report. The Institute for Supply Management said that manufacturing grew last month at the fastest pace since June. The crucial jobs report for November will be released by the Labor Department on Friday.

Benchmark oil for January delivery was up 76 cents to $100.96 per barrel in electronic trading on the New York Mercantile Exchange on Friday. The contract lost 16 cents to end at $100.20 per barrel on the Nymex on Thursday.

In currency trading, the euro rose to $1.3473 from $1.3460 late Thursday in New York. The dollar rose to 77.79 yen from 77.76 yen.

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