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Stocks lose shine due to soft US economic data

By Pan Pylas

Associated Press

Published: Tuesday, Jan. 31 2012 8:46 a.m. MST

A masked man is reflected on an electronic stock board at a securities firm in central Tokyo, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece's debt crisis weighing on investor sentiment.

Koji Sasahara, Associated Press

LONDON — Stocks rose on Tuesday on hopes that Europe was making progress in its fight to contain the debt crisis, but they lost some of their shine after a run of soft U.S. economic data.

Sentiment in the first half of the day in Europe was buoyant after European leaders agreed the broad outlines of a deal to tie the countries that use the euro closer together and on hopes that Greece is close to a debt-reduction deal with private creditors.

Late Monday, following the agreement by a large majority of countries in the European Union to sign a new treaty designed to stop overspending, Greece's Prime Minister Lucas Papademos indicated that progress was being made.

Though Greece remains the epicenter of Europe's debt crisis, leaders are pushing ahead with other plans to tie economies together. Only Britain and the Czech Republic opted out of signing the new treaty, commonly known as the fiscal compact, which is meant to make it more difficult for countries to run up massive debts, like the ones now roiling the 17-nation eurozone.

The hope among participants is that the tighter rules will restore confidence in their joint currency and convince investors that all of them will get their debts under control. For now, investors appear to be giving European policymakers the benefit of the doubt, especially as there are hopes a second bailout of Greece will be agreed alongside a debt-reduction deal between the country and its private creditors, possibly as soon as this week.

However, some of the optimism in Europe faded as U.S. markets opened, after a private research group found consumer confidence retreated in January after two straight months of big gains. The Conference Board said its main index fell to 61.1 from a revised 64.8 in December. Economists had expected a reading of 68.

A University of Chicago survey into manufacturing also disappointed after it showed a marked deterioration in orders and bigger drops in backlogs and employment.

"Even allowing for the way equities have taken the data today, the trend is still mildly risk positive," said Alan Ruskin, an analyst at Deutsche Bank.

In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 5,702 while Germany's DAX rose 0.6 percent to 6,483. The CAC-40 in France was 1.4 percent higher at 3,309.

In the U.S., the Dow Jones industrial average was up 0.1 percent at 12,664 while the broader Standard & Poor's 500 index rose 0.2 percent to 1,315.

The more skittish mood in markets was evident in the performance of the euro t, which was down 0.1 percent at $1.3131, having earlier traded above $1.32. The euro often garners support when investors look to take on more risk.

Europe's debt woes remain the main worry in the markets. A growing fear is that Portugal may also need to get private creditors to reduce their debts, even though Europe's leaders say Greece's debt-reduction deal is a one-off. Portugal's borrowing costs have been rising consistently to record highs over recent days as the economy shows few signs of improving.

Vassili Serebriakov, an analyst at Wells Fargo Bank, noted "optimism remains fragile, however, given an apparent increase in Portuguese tensions, with Portugal's two- and ten-year government bond yields reaching new highs today."

Earlier in Asia, solid Japanese industrial data helped stocks rally."

Tokyo's Nikkei 225 rose 0.1 percent to 8,802.51 after data showed December industrial activity rose 4 percent over the previous month. Hong Kong's Hang Seng gained 1.1 percent to 20,383.3 and Seoul's Kospi was up 0.8 percent at 1,955.79.

China's benchmark Shanghai Composite Index was up 0.3 percent at 2,292.61 ahead of Wednesday's release of a key manufacturing index. Investors are hoping for a loosening of credit curbs if it shows activity is slowing amid lackluster global demand.

Oil prices tracked equities higher — benchmark oil for March delivery was up $1.91 at $100.69 per barrel in electronic trading on the New York Mercantile Exchange.

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Joe McDonald in Beijing contributed to this report.

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