LONDON—European stocks opened higher Wednesday amid growing expectations that Friday's EU summit will yield a breakthrough for tackling the region's debt crisis.
London's FTSE-100 Index opened 0.9% higher, the DAX in Frankfurt rose 1.4% to 6115.63, and the CAC-40 Index in Paris gained 1.7% to 3235.2.
The mood is likely to be lifted by a Financial Times report late Tuesday, suggesting that European Union officials are discussing plans to implement two separate bailout funds to tackle Europe's debt woes.
"News of EU discussions to create a more powerful rescue fund by effectively almost doubling up the current fund by allowing the new European Stability Mechanism to run alongside the current bailout fund and gaining additional support from the International Monetary Fund will fuel hopes that officials are finally getting to grips with the size of the problem in the euro zone," said Crédit Agricole Corporate & Investment Bank. It added, however, that the proposal is by no means a done deal and could face resistance, so risk appetite will likely remain fragile.
This week, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they will propose altering EU treaties to bolster fiscal discipline. "Expectations that the Franco-German deal announced late Monday will be rubber-stamped at the summit are high and the warning shot by Standard & Poor's suggests that the stakes are even higher should there be no further progress this week," said Crédit Agricole. Despite the positive open, traders cautioned that as expectations for the summit rise, so does the potential for disappointment.
Economic releases are fairly thin on the ground Wednesday, with U.K. and German industrial production data due at 0930 GMT (0430 ET) and 1100 GMT, respectively. Investors will also eye a bond auction by Germany, particularly after the country's last auction, which was largely considered a flop. "The outcome of today's auction is not easy to predict but we suspect the still expensive German paper will be hardly absorbed, with risks of another poor auction," said Newedge.
On Wall Street Tuesday, stocks ended mostly higher following the FT report, having wavered earlier in the session. The Dow Jones Industrial Average ended up 0.4% at 12150.13, the Standard & Poor's 500-stock index gained 0.1% to 1258.47 and the Nasdaq Composite ended down just 0.2% at 2649.56.
In Asia, stock markets rose Wednesday amid cautious optimism European leaders will deliver a comprehensive plan to contain the continent's debt crisis, while Australia's stronger-than-expected third-quarter growth supported the Sydney market. Japan's Nikkei Stock Average rose 1.2%, Australia's S&P/ASX 200 gained 0.7% and South Korea's Kospi Composite was 0.6% higher. Hong Kong's Hang Seng Index gained 0.9%, China's Shanghai Composite was flat and India's Sensex rose 0.8%.
In foreign-exchange markets, the euro gained some ground against the dollar. The common currency was recently at $1.3445,from $1.3401 late Tuesday in New York. The dollar was fetching ¥77.71 from ¥77.73.
Spot gold was at $1,730.40 a troy ounce, up $2 from its New York settlement Tuesday. January Nymex crude oil futures were up 45 cents at $101.73 a barrel and January Brent oil futures were up 47 cents at $111.28.
The December bund contract was down 0.25 at 134.53.
Write to Michele Maatouk at michele.maatouk@dowjones.com
European Union officials, German Chancellor Angela Merkel, European Stability Mechanism, Agricole Corporate , International Monetary Fund, European stocks
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