World stocks get boost after Spain promises to cut budget
AP and AFPLONDON/HONG KONG--World stock markets rose Friday after Spain announced severe budget cuts meant to show international lenders and investors that the country is taking steps toward getting its debt under control.
September 29, 2012, 12:01 am TWN
The Spanish government on Thursday unveiled a draft budget for 2013 that cuts overall spending by 40 billion euros (US$51 billion). Wall Street spurted higher on the news. Many economists see the cost-cutting as a signal Spain is preparing to request financial aid from other governments and the European Central Bank.
Spain, whose banks have been hobbled by toxic assets, has so far been reluctant to ask for help because stiff conditions will likely be imposed in exchange for any aid.
European stocks rose in early trading. Britain's FTSE 100 gained 0.3 percent to 5,797.35. Germany's DAX added 0.5 percent to 7,322.85. France's CAC-40 advanced 0.2 percent to 3,446.37. Wall Street headed for a flat open, with Dow Jones industrial futures nearly unchanged at 13,412 and S&P 500 futures barely budging at 1,441.20.
Hong Kong's Hang Seng Index rose 0.4 percent to 20,840.38. South Korea's KOSPI added nearly 0.4 percent to 1,996.21 and Australia's S&P/ASX 200 advanced slightly to 4,387. Benchmarks in Singapore, Taiwan, Thailand and the Philippines also rose.
But Japan's Nikkei 225 index lost 0.9 percent to 8,870.16, sinking on a government report that showed industrial production fell a further 1.3 percent in August. Weak global and domestic demand is weighing on manufacturers, particularly electronics makers, who are facing intense competition from South Korean, Taiwanese and other Asian manufacturers.
The strong yen, which erodes overseas earnings and makes Japanese-made products relatively more expensive, is also eating into profits.
Major Japanese exporters got slammed. Toyota Motor Corp. fell 2.4 percent and Honda Motor Co. shed 2.7 percent. Sharp Corp. lost 3 percent.
Rising gold prices helped related shares. Hong Kong-listed Zijin Mining Co., China's largest gold miner, gained 1.6 percent. Australia's Newcrest Mining Ltd. jumped 3.3 percent.
In other markets:
— Taipei rose 0.41 percent, or 31.36 points, to 7,715.16.
— Wellington closed 0.66 percent, or 25.12 points, higher at 3,834.15.
— Manila closed 0.84 percent higher, adding 44.61 points to 5,346.10.