Shizuo Kambayashi, Associated Press
PARIS — The inching progress toward a deal to secure a new bailout for Greece and a Chinese assurance that it will continue to invest in Europe pushed stocks higher Wednesday, despite signs the eurozone is headed toward recession.
Greece's finance minister promised that the country would fulfill all the obligations imposed by its international creditors before they discuss handing over more loans later Wednesday. Those include plugging a €325 million ($425 million) financing gap and written guarantees from the governing coalition's party leaders that they'll carry out the plan if they come to power.
Greece's European and International Monetary Fund creditors have grown impatient with Athens, which is caught between an enraged population and a potentially catastrophic default if it does not manage to secure another €130 billion ($170 billion) in loans. European officials canceled a meeting scheduled for Wednesday to green light that second bailout and instead will hold a conference call.
The back-and-forth over Greece's rescue, however, did not curtail a rally in stock markets Wednesday.
In France, the CAC-40 rose 1 percent to 3,411, while Germany's DAX was up 1.2 percent at 6,809. The FTSE index of leading British shares gained 0.2 percent to 5,913.
The euro also edged up to $1.3145.
The resilience of stock markets despite the drawn-out negotiations over a deal to save Greece from default could reflect investor confidence that European leaders would not dare, in the end, to walk away from Athens. That is despite an increasing recognition that the deal is too small to put Greece back on the path to financial health and calls from analysts that the eurozone could weather a Greek default and would emerge in a better position.
"If the EU really did have total faith that there would be no contagion at all from a Greek default then they might well be prepared to take the chance," said Gary Jenkins of Swordfish Research. "However, whilst the signs from the bond market are encouraging, it is unlikely that they will want to undertake such an experiment at this stage."
Greece's European partners, meanwhile, are struggling with poor growth of their own. On Wednesday, Eurostat figures showed that the economy for the 17 countries that use the euro contracted 0.3 percent in the final three months of 2011, a clear sign that Europe's debt crisis has spared no country.
The decline followed a meager 0.1 percent increase in the previous three-month period and could signal the area is heading into recession, defined as two consecutive quarters of negative growth.
Slow growth has been one of the most damaging effects of Europe's debt crisis, which forced many countries to savagely slash their budgets to reassure investors they would be able to pay off debts borrowed in boom times. But some observers have noted that cutting costs only exacerbates slow growth, which, in turn, exaggerates deficits.
To dig out of the vicious cycle, many have hoped for a rescue from the outside, particularly from China, which has vast foreign currency reserves. Chinese officials have been cautious to say they want to help Europe — their biggest export market — but that they have to make investments that are good for the Chinese. They have given no sign they would do more than continue to invest in the safest European government bonds.
China's central bank governor, Zhou Xiaochuan, reiterated those ideas early Wednesday, but they boosted spirits in Europe, nonetheless, underscoring how eagerly investors are hoping for a miracle.
Earlier, Asian shares rode news that Japan's central bank would further loosen monetary policy, raising hopes that would lift its powerhouse export sector.
The Nikkei 225 index in Tokyo soared 2.3 percent to close at 9,260.34, its highest close since Aug. 5. South Korea's Kospi gained 1.1 percent to 2,025.32, while Hong Kong's Hang Seng jumped 2.1 percent to 21,365.23, its highest finish since Aug. 4.
Mainland Chinese shares advanced with the benchmark Shanghai Composite Index climbing 0.9 percent to 2,366.70, its highest close this year. The Shenzhen Composite Index gained 1.5 percent to 925.99.
Benchmark oil for March delivery moved up 84 cents to $101.58, also brushing off troubles in Greece to focus on tensions in the Middle East that could lead to a tightening of supplies.
Associated Press writers Pamela Sampson in Bangkok, Pan Pylas in London and Joe McDonald in Beijing contributed to this report.
- Utah humanitarian aid worker returns from...
- Southern Baptists tell pastors: hold line on...
- A place with a view: Inside NYC's tallest...
- Cause sought for space-supply rocket explosion
- Chocolate compound restores age-related...
- Pope Francis: ‘Evolution is not...
- Gunfire, arrests erupt as Giants fans revel...
- Israeli leader lashes back at harsh US criticism
- Pope Francis: ‘Evolution ... 61
- Pastor who performed gay marriage keeps... 29
- Southern Baptists tell pastors: hold... 22
- Utah among lowest in nation in... 19
- Churches proceed carefully when... 16
- George P. Bush says dad Jeb Bush is... 15
- Obama on Ebola fight: US can't seal... 11
- News Guide: A look at latest Ebola... 9