The Associated Press
LONDON — Global stock markets advanced Thursday despite serious challenges to the global economy, including Japan's struggle to contain a nuclear crisis, financial tremors in Portugal and Ireland and the military action in Libya.
Over the past few weeks, Europe's debt crisis has taken a back seat to events elsewhere in the world.
However, the resignation of Portuguese Prime Minister Jose Socrates after lawmakers rejected his government's latest austerity package has reinforced speculation the country will become the third euro nation to be bailed out following Greece and Ireland. That was clear in the bond markets, where Portugal's yield on its ten-year bonds climbed to 7.7 percent, a new euro-era high.
The resignation came on the eve of an EU summit in Brussels, where leaders will thrash out an agreement on an all-encompassing strategy to deal with the debt crisis that has dominated European politics.
Though the prevailing market view is that Portugal will have to tap an EU bailout fund sometime soon, there were hopes that this could be it as far as the current round of bailouts is concerned.
When Greece was bailed out last May, investors were wondering who would be next. The same occurred after Ireland's rescue in November. But few today think another country — such as Spain — is in danger of being the next domino to fall, even though Moody's downgraded its view on 30 Spanish banks Thursday.
"For now, investors have taken comfort in the view that the beefed-up EU rescue fund is more than large enough to withstand a Portuguese bailout and prevent systemic risk to Europe's banking system," said Sal Guatieri, an analyst at BMO Capital Markets.
"Of course, this hinges on a belief that Spain — the fourth largest eurozone economy — is strongly committed to its austerity plan," Guatieri added.
Investors' appetite for riskier trades, such as stocks, has been weighed down in recent weeks by the confluence of alarming events around the world. On top of Japan's natural disasters, investors had to grapple with the potential implications of a nuclear meltdown and the escalating conflict in Libya. In Libya, coalition forces including the U.S., Britain and France, launched another wave of strikes to protect civilians from government troops and to enforce a no-fly zone.
On Thursday, sentiment in the markets appeared to be holding up. In Europe, the FTSE 100 index of leading British shares was up 0.9 percent to 5,850 while the CAC-40 in France rose 0.8 percent to 3,946. Germany's DAX was 1.4 percent higher at 6,899.
The euro was also solid despite the political crisis in Portugal, trading 0.2 percent higher at $1.4135.
In the U.S., the Dow Jones industrial average was up 0.3 percent at 12,118 soon after the open while the broader Standard & Poor's index rose 0.2 percent to 1,301.
U.S. stocks were supported by figures showing fewer people applied for unemployment benefits last week, with the average number of unemployment filings over the last four weeks dropping to its lowest level since July 2008.
Earlier in Asia, Hong Kong's Hang Seng rose 0.4 percent to 22,915.28, and South Korea's Kospi added 1.2 percent to 2,036.78.
However, mainland Chinese shares were slightly down amid concerns that the People's Bank of China would continue to tighten monetary policy in order to fight inflation. The Shanghai Composite Index lost 0.1 percent to 2,946.71 and the smaller Shenzhen Composite Index lost less than 1 point to 1,299.53.
The Nikkei 225 slipped 0.2 percent to close at 9,435.01, a day after Japan estimated the damage from the March 11 earthquake and tsunami at $309 billion. It now ranks as the most expensive natural disaster on record.
In the oil markets, benchmark crude for May delivery was down 10 cents at $105.65 a barrel in electronic trading on the New York Mercantile Exchange.
Oil has jumped 24 percent since Feb. 14 as violent protests rocked the Middle East and North Africa and traders worry about possible crude supply disruptions. In Libya, fighting between rebels and government forces has halted most of the country's 1.6 million barrels a day of crude production.
Investors expect the international military intervention launched to halt Libyan leader Moammar Gadhafi's attacks on critics will likely prolong the shutdown of oil output from the OPEC nation.
Pamela Sampson in Bangkok contributed to this report.
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