Cautious optimism on EU deal lifts global stocks

LONDON (Reuters) - Growing optimism that euro zone
leaders are on track to produce a confidence-boosting package of
measures to solve the debt crisis at their weekend summit lifted risk
appetite on Wednesday, with the euro and global equity markets posting
gains.






EU officials are reported to be working on a last-minute proposal to
raise the combined lending limit of the EFSF rescue fund and the
permanent structure that will replace it, the ESM. The latter fund was
due to be launched in 2013 but efforts are said to underway to bring
that forward by a year.
"Investors are pinning a lot on this summit. Those hopes that Europe will be able to piece a deal together are still growing," said Keith Bowman, equity analyst at Hargreaves Lansdown.
The
MSCI world equity index <.MIWD00000PUS>, which ended a recent
rally to dip on Tuesday after Standard & Poor's told 15 euro zone
member nations it may cut their debt ratings, was slightly firmer.
The optimism also saw European shares resume their recent rally with the FTSEurofirst 300 <.FTEU3> index of top European shares up 1 percent, adding to gains of more than 11 percent since late November.
The euro edged higher versus the dollar,
holding above a one-week low hit the previous session, on the cautious
optimism over the outcome at the leaders summit later this week.
Gains
were capped, however, by concerns that policymakers could disappoint
markets yet again and the limited scope of the euro's bounce suggested
investors were wary about its outlook.
"The market has again and
again bought into the idea of a comprehensive and convincing solution
from policymakers so there is potential for some short-term upward
movement in the euro today," said Ulrich Leuchtmann, head of currency research at Commerzbank.
"Some people are also preparing for the ECB to announce something more drastic," he said.
In
European bond market demand for core German government debt eased ahead
of an auction of new five-year paper, with investors wary after a debt
sale two-weeks ago failed to get enough bids to cover the amount
offered.
After the world's central banks weighed in with fresh
dollar liquidity last week, the ECB's 7-day dollar tender will give the
latest indication of funding stress for Europe's banks.
The Bank of England starts its final two-day rate-setting meeting of the year amid signs inflationary pressures are easing.
The British Retail Consortium (BRC)
said retail inflation grew at its slowest pace for a year in November,
held back by supermarket discounts at the start of the crucial Christmas shopping period.
Attention
is also switching to the ECB policy meeting on Thursday where
expectations of an interest rate cut have risen after statistics agency
Eurostat confirmed estimates pointing to weakening growth.
In
commodity markets Brent crude rose above $111 a barrel after the euro
strengthened against the U.S. dollar on the hopes of a credible solution
to the euro zones problems.
(Additional reporting by Nia Williams and Atul Prakash)




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Great article, lets me know not to hold Euros or even Us dollars, but they will all come back after the crisis is over and the Rv takes hold. My stock people say right now is the time to invest in the Euro, US Dollar and the Yen, despite the Yens 200% debt to GDP ratio, riskey at best without a currency fix. AJ