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European stocks rise as oil prices fall

Europe’s main stock markets rose for the most part yesterday following a festive break and a rally in Tokyo, with Paris reaching a 2012 high.

Traders were focused on whether the United States would avert the 2013 “fiscal cliff” of sharp tax hikes and spending cuts.

London’s FTSE 100 index of leading companies was stable at 5,954.30 points; the DAX 30 gained 0.26 per cent to 7,655.88 points in Frankfurt; and the Paris CAC 40 added 0.59 per cent to 3,674.26 points, its highest level for the year.

The Milan FTSE Mib index added 0.45 per cent to 16,408 points after Italy raised €8.5 billion in a short-term debt auction.

In foreign exchange deals, the euro rose to $1.3231 from $1.3223 late in New York on Wednesday. Gold prices declined to $1,655.50 an ounce on the London Bullion Market from $1,662.50 late on Monday.

On Wall Street however, US stocks were lower in midday trading as the deadline for the White House and Republican lawmakers to reach some kind of budget agreement crept closer. The Dow Jones Industrial Average was down by 0.67 per cent while the broad-market S&P 500 fell by 1.01 per cent and the tech-rich Nasdaq Composite lost 0.87 per cent.

Meanwhile crude oil prices dropped yesterday in thin trading and on uncertainty about whether a deal to avert the US “fiscal cliff” of tax hikes and spending cuts could be reached by a year-end deadline, analysts said.

New York’s main contract, light sweet crude for delivery in February, shed 12 cents to $90.86 a barrel. Brent North Sea crude for February lost 58 cents to $110.49 a barrel in London midday deals.

Republicans and Democrats remained deadlocked even as US President Barack Obama cut short his Christmas holiday and flew back to Washington to attempt to broker an 11th-hour deal over the looming deadline for simultaneous, sharp increases in taxes and cuts in spending.

US Treasury Secretary Timothy Geithner has warned that should the White House and US lawmakers fail to agree on a budget compromise to prevent the economy plunging over the “fiscal cliff, then he could not be sure when the money would dry up.”

He said the US government would reach its 16.39-trillion-dollar debt limit – a Congress-imposed ceiling – on Monday.

Investors fretted over the looming deadlines for a series of tax hikes and spending cuts worth some $600 billion (€452 billion) due to take effect on January 1 and 2 respectively.

Asian stock markets closed higher yesterday, with Tokyo scaling a 21-month high thanks to a weaker yen, traders said.

Tokyo’s benchmark Nikkei 225 index climbed 0.91 per cent to 10,322.98 points, the highest level since March 11 last year when a massive quake struck Japan, sparking a tsunami and the worst atomic crisis in a generation.

The dollar rose to its highest level in more than two years against the yen as Prime Minister Shinzo Abe took office, raising expectations that the Bank of Japan would initiate more aggressive monetary easing under his leadership.

A weaker yen boosts Japan’s exporters, helping to lift their share prices. Europe’s main stock markets have meanwhile enjoyed strong gains over the year, largely thanks to a late 2012 rally on signs that the eurozone debt crisis was being tackled effectively.

Frankfurt has surged almost 30 per cent this year, while Paris has gained 16 per cent and London seven per cent in value.

In a reminder however that deep problems remain, shares in Spain’s bailed-out lender Bankia plunged on Thursday after banking authorities said it had a negative of value of €4.148 billion ($5.5 billion).(AFP)

Shares in Bankia, which is at the heart of a crisis in the bad-loan ridden Spanish banking system, slumped 19.53 percent to 55.20 cents in afternoon trade.

Madrid’s main IBEX 35 index was 0.22 percent lower at 8,280.90 points. Spain’s stock market has fallen by about 3.0 percent since the start of the year.

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