European Stocks Rise As Debt Worries Ease

European stocks rose Friday as worries about the region’s fiscal crisis eased after Spain, one of the most pressured by markets, successfully sold bonds, and government leaders said they would reveal results of bank stress tests.

Although Spain was charged higher costs to borrow money, demand for the debt was healthy, boosting sentiment among investors worried the country could need a financial backstop.

Later Thursday, the EU’s 27 leaders agreed to publish the results of tests that check the stability of banks. The results were not initially meant to be made public, but after some countries said they would do so to quell rumours of banking problems, the EU agreed to act in unison. The move was seen as a vote of confidence in the financial sector.

Britain’s FTSE 100 stock index was up 0.6 per cent at 5,284.71 while Germany’s DAX was up 0.2 per cent at 6,237.65. France’s CAC-40 gained 0.4 per cent to 3,696.11. Spain’s index was the biggest riser, adding 1.3 per cent.

The euro, meanwhile, rose to $1.2396 from $1.2379 late Thursday in New York — well up from the four-year lows below $1.19 hit early last week.

Publication of the bank tests “could turn out to be a key stepping stone towards increasing the transparency of the eurozone banking sector,” said Mitul Kotecha, analyst at Credit Agricole.

Good news also came from Greece, where the International Monetary Fund, the European Union and the European Central Bank jointly said that deficit-reducing spending cuts were on track.

Greece received the first installment of loans in May, just in time to prevent default and repay government bonds that were maturing. It is to receive the next in September if the July review — the first formal review — shows it is still meeting its targets.

“All in all, a significant amount of uncertainty was resolved yesterday,” Credit Agricole analysts said.

The upbeat data continued on Friday, when official figures showed Britain’s public borrowing was below expectations in May. Though the 16 billion pounds borrowed remained high by historical standards, it will be welcomed by markets ahead of the government’s publication on Tuesday of an “emergency budget” to fight the deficit.

Shares in BP, which had risen sharply on Thursday after the company agreed to set up a $20 billion fund to pay for the oil spill damages, were up another 1.2 per cent in London. Experts say the deal offers some clarity on the extent of the company’s liabilities.

Wall Street was expected to rise on the open — Dow industrials futures were up 0.1 per cent at 10,378 while Standard & Poor’s 500 futures were up 0.1 per cent at 1,112.80.

Asia, however, was mixed by the closing bell.

Japan’s benchmark Nikkei 225 stock index edged down less than 0.1 per cent to 9,995.02 and China’s Shanghai Composite Index shed 1.8 per

cent to 2,513.22 ahead of Agricultural Bank of China’s record-breaking initial public offering. Taiwan’s index dropped 0.3 per cent.

Elsewhere, South Korea’s Kospi rose 0.2 per cent to 1,711.95 and Australia’s S&P/ASX 200 gained 0.5 per cent to 4,551.90. Hong Kong’s Hang Seng added 0.7 per cent to 20,286.71.

The dollar fell to 90.73 yen from 90.92 yen in New York late Thursday.

Benchmark crude for July delivery was down 64 cents at $76.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped 88 cents to settle at $76.79 on Thursday.