Global stock markets firmer, euro up

Wall Street got off to a strong start on a series of major takeover deals, helping Europe pick up after Asian markets moved ahead sharply following figures showing the Japanese economy doing better than expected.

However, US stocks then slipped after the Federal Reserve Bank of New York said its regional manufacturing activity index dropped to minus 7.7 points in August from minus 3.8 points in July for a third consecutive monthly fall.

The figures hit Wall Street, eroding gains to leave the blue-chip Dow Jones Industrial Average up 0.93 percent at around 1600 GMT while the tech-heavy Nasdaq Composite added 0.67 percent.

Dealers said news that Internet giant Google is to buy US mobile phone maker Motorola Mobility for $12.5 billion in cash, giving a boost to its own Android mobile operating system, gave support as investors also followed other deals.

The euro and European stocks meanwhile got a boost after the European Central Bank said it bought 22 billion euros of government bonds last week to help ease the pressure on Italy and Spain, pushing down their borrowing costs.

Markets have suffered heavy losses in recent weeks on fears the third- and fourth-largest eurozone economies could need a bailout to follow Greece, Ireland and Portugal but recovered some lost ground on the ECB intervention.

Estimates for the ECB's intervention were 15-20 billion euros and topping the figure was reassuring, helping offset a flat refusal by Berlin to consider issuing common 'eurobonds' as a way to bolster weaker eurozone member states.

In London, the FTSE 100 index of leading companies closed with a gain 0.57 percent to 5,350.58 points. In Frankfurt, the main DAX index added 0.41 percent to 6,022.24 points and in Paris the CAC 40 was up 0.78 percent at 3,239.06 points.

Madrid added 0.71 percent while Milan, which jumped 4.0 percent on Friday, was closed for a public holiday. Swiss stocks jumped 1.37 percent.

The euro was up sharply at $1.4442 from $1.4249 late Friday in New York, boosted by the weak New York manufacturing figures and the ECB announcement while the dollar was steady at 76.74 yen after 76.70 yen.

"The news on the record (ECB) bond purchases did give the euro a boost," said ABN Amro economist Nick Kounis.

"But there are question marks (over) whether this scale of purchases is sustainable given the ECB's commitment to mop up the liquidity," he added.

Gold was firmer at $1,739 an ounce, after $1,736 late Friday and well down on Thursday's record high of nearly $1,815.

Some analysts were disappointed that eurobonds would not be on the agenda at a meeting Tuesday in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel because such a move would keep the eurozone momentum going.

"We began the day looking forward to" Tuesday's meeting, said analyst David Morrison at trading group GFT. "Hopes were growing that the two leaders were ready to take drastic action to curb the debt crisis, with speculation that the creation of a eurobond would be agreed on."

However, Berlin ruled that out and in consequence, traders trimmed speculative positions, Morrison added.

Germany is opposed to the introduction of eurobonds as it believes they would increase its own borrowing costs and let countries avoid implementing much-needed reforms to stabilise their own economies and the wider eurozone.

CMC Markets analyst Michael Hewson described eurobonds as a "non-starter" because the German government cannot take on a burden that its taxpayers resolutely reject.

"Weekend talk about some form of a euro bond solution to the debt crisis in Europe has been swiftly rebuffed by both Germany and France," Hewson said.

"The concern remains that (the meeting) ... will not give the markets the solution they crave and as such sentiment will remain susceptible to significant price swings despite today's gains," he added.

In Asian trade earlier Monday, Tokyo gained 1.37 percent as better-than-expected growth figures showed Japan is on the road to recovery after a devastating earthquake and tsunami in March.

"A calmer tone has settled over the markets after last week's turmoil," said Rabobank analyst Jane Foley.

"Friday's better-than-expected release of US July retail sales data, combined with (the) improved Japanese second-quarter GDP number, has allowed for a collective sigh of relief across the global investment community."

Copyright AFP (Agence France-Presse), 2011