World markets buoyed by Bank of America move

By PAN PYLAS

posted: 1 HOUR 57 MINUTES AGO

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LONDON -World stock markets rose Thursday, with Japan's Nikkei up around 4 percent, after Bank of America Corp. said it will repay $45 billion of government bailout money and as investors prepared for a crucial policy statement from the European Central Bank.

In Europe, the FTSE 100 index of leading British shares was up 10.42 points, or 0.2 percent, at 5,337.79 while Germany's DAX rose 33.36 points, or 0.6 percent, to 5,815.04. The CAC-40 in France was 21.10 points, or 0.6 percent, higher at 3,817.02.

Earlier in Asia, Japanese stocks were boosted by a fall in the value of the yen which, if sustained, could help exporters — Japan is particularly dependent on exporting its cars and electronics for its economic growth. The Nikkei 225 stock average jumped 368.73 points, or 3.8 percent, to 9,977.67.

Sentiment was mainly buoyed by the news that Bank of America intends to repay money it received during the height of the credit crisis last year and after its purchase of Merrill Lynch earlier this year to escape the heightened supervision that goes along with it.

"The significance of the BoA move is that they are in a position to be able to do it," said Kit Juckes, chief economist at ECU Group.

"This, surely, is a massive endorsement of the monetary policies we have seen in place for the last year," he added.

Attention later will focus on the European Central Bank, which kept its benchmark interest rate unchanged at 1 percent, as expected.

More important will be the upcoming press conference with ECB president Jean-Claude Trichet. Analysts expect Trichet to announce a number of significant decisions and announcements. In particular, they will be looking to see what he says about liquidity measures introduced to keep the banking system from collapse and to limit the scale of recession.

Investors will then turn their attention to Friday's U.S. nonfarm payrolls report for November — data that often sets the tone in the markets for a week or two.

Wall Street was poised for a steady, if unspectacular, opening — Dow futures were up 35 points, or 0.3 percent, at 10,474 while the broader Standard & Poor's 500 futures rose 4.6 points, or 0.4 percent, to 1,112.50.

If investors conclude the U.S. economy is losing steam, that could pave the way for a bout of profit-taking following an eight-month bull run. Further evidence of a strong U.S. economic recovery could yield more buying.

The consensus is that November U.S. non-farm payrolls fell by around 120,000 but that the unemployment rate held steady at a 26-year high of 10.2 percent.

So far this week, investor jitters related to Dubai's debt problems have calmed amid hopes that Dubai World, the government investment company, will have around $26 billion worth of its debts restructured. Last week, the company — with a total of $60 billion worth of debt — sent shockwaves around global financial markets when it said it was looking to postpone forthcoming debt payments until May.

The hope in the markets is that Dubai's problems will not affect the global financial system.

"It wouldn't be a surprise if sentiment turned sour again as the week draws to a close, should tomorrow's nonfarm payrolls in the U.S. come in below expectations," said David Jones, chief market strategist at IG Index.

Elsewhere in Asia, Hong Kong's Hang Seng added 264.30 points, or 1.2 percent, to 22,553.87, and South Korea's index rose 1.5 percent, to 1,615.00. Australia's benchmark rose 0.3 percent.

Among falling markets, Shanghai lost 0.2 percent.

Oil prices rose, with benchmark crude for January delivery up 51 cents at $77.11, while gold advanced 0.5 percent to $1,289.70 an ounce after earlier hitting a new record high of $1,227.5.

The dollar was up 0.8 percent on the day at 88.16 yen while the euro was 0.5 percent higher at $1.5123, within touching distance of its 16-month high of $1.5144.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

2009-12-03 08:31:40