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Spanish hopes buoy markets ahead of EU summit

PAN PYLAS, AP Business Writer
Wednesday, 17 Oct 2012 | 6:37 AM ET

LONDON -- This week's positive momentum in financial markets stuttered Wednesday after fairly downbeat earnings from traditional bellwether stocks IBM and Intel, and as investors awaited a meeting of European leaders.

However, rising speculation that Spain will soon ask for help to keep its borrowing costs down continues to shore up European markets, particularly in Madrid. The surprise decision late Tuesday by Moody's to maintain its credit rating on Spain has also helped shore up sentiment.

Spain's main IBEX index outperformed its counterparts in Europe, closing 2.3 percent higher at 8,128, while the yield on the country's 10-year bond fell 0.3 percentage points to a manageable 5.46 percent.

Elsewhere in Europe, Germany's DAX rose 0.25 percent to 7,394, while the CAC-40 in France was 0.76 percent higher at 3,527. The FTSE 100 index of leading British shares was up 0.7 percent higher at 5,910.

Hopes that the uncertainty over Spain will come to an end soon come a day before EU leaders gather in Brussels, and once again the debt crisis is likely to feature heavy in discussions.

"Markets will be watching the headlines for any signs of progress towards further assistance for Greece or Spain," said Nick Bennenbroek, an analyst at Wells Fargo Bank.

The euro has also been buoyant over the past few days on the back of the rising Spanish speculation. By late afternoon London time, it was trading at $1.3127.

"The euro rebound has accelerated reflecting building investor optimism regarding Spain," said Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Wall Street, however, had slightly more subdued opening after IBM revealed below-forecast revenue in the last quarter and Intel said the usual bounce in sales due to the holiday season is likely to be cut in half this year, partly because of an uncertain global economic recovery.

The Dow Jones industrial average was slightly up, 0.16 percent at 13,475, and the broader S&P 500 index rose 0.3 percent to 1,460.

Earlier in Asia, Japan's Nikkei 225 stock index closed 1.2 percent higher at 8,86.55 while Hong Kong's Hang Seng gained 1 percent to 21,411.64. In mainland China, the main index in Shanghai rose 0.3 percent to 2,105.62.

In the oil markets, a barrel of benchmark New York crude was 14 cents lower at $91.95 a barrel.

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