World stocks buoyed by Fed stimulus hopes

PARIS – World stock markets mostly rose Wednesday amid hopes that the Federal Reserve would announce measures to stimulate the U.S. economy.

There is a broad anticipation that economic policymakers will either extend a program of buying long-term bonds to keep rates low, or at least signal a readiness to act should the economy sputter at the end of a two-day meeting ending later Wednesday. The Fed has already launched two rounds of bond purchases to lower long-term interest rates.

Another option is to extend Operation Twist, under which the Fed has been gradually selling short-term Treasury securities and using the proceeds to buy longer-term bonds to keep their rates down. The current program is set to expire at the end of the month.

Britain's FTSE100 index was up 0.5 percent to 5,613.63 and Germany's DAX was up 0.2 percent at 6,378.67. France's CAC 40 was down 0.1 percent at 3,113.61.

Wall Street looked set to open higher as well, adding to big gains the previous day. Dow futures were up 0.2 percent while S&P 500 futures were 0.1 percent higher.

"The market's risk-averse sentiment is easing, and investors have quite high hopes for central bankers to help," said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong. "Investors are now taking a breather before looking at the problem of Spain."

Concerns over Spain, Greece and the euro limited any optimism over potential stimulus from the Fed.

The Greek presidency said Antonis Samaras would be sworn in as prime minister after three parties agreed to form a coalition government, ending nearly seven weeks of political uncertainty which threatened to plunge Europe deeper into a financial crisis with global repercussions.

In the longer term, however, concerns remain over how well the government will be able to govern and push through new austerity reforms after some half of the Greek electorate voted for parties rejecting those measures.

Meanwhile, borrowing rates in Spain remained dangerously high despite a small drop on Wednesday. If they do not drop in coming weeks or months, Madrid is likely to have to ask for an international bailout to be able to finance itself.

Italian Premier Mario Monti has come out in favor of using the eurozone's €440 billion ($555 billion) bailout fund to buy the sovereign debt of countries like Spain and Italy, which are implementing debt reduction measures but still suffering from high borrowing costs. Such a move would have the impact of lowering the borrowing rates.

Monti told a briefing at the close of the Group of 20 summit in Los Cabos, Mexico that using European Financial Stability Facility funds "was one of the topics of conversation" among leaders. Monti said the idea would be discussed further when he meets with the leaders of Germany, France and Spain in Rome on Friday, according to press agency LaPresse.

The leaders plan to come up with proposals for an EU summit the following week.

Spanish Finance Minister Cristobal Montoro denied that the country needs a full-fledged bailout of its public finances "because it does not need to be rescued."

Spain has requested bailout money for its banks hurting from a property boom that went bust. Audits are due Thursday that will help Spain determine how much it needs from a €100 billion ($126 billion) lifeline to be set up by the 17-nation eurozone.

Earlier, Japan's Nikkei 225 index closed up 1.1 percent to 8,752.30. Hong Kong's Hang Seng added 0.5 percent to 19,518.85 and South Korea's Kospi gained 0.7 percent to 1,904.12.

Australia's S&P/ASX 200 added 0.2 percent to 4,132.40. Benchmarks in Singapore, Taiwan and Indonesia also ended higher. Mainland China's Shanghai Composite Index fell. Benchmarks in Thailand and New Zealand were also lower.

Benchmark oil for July delivery was up 5 cents to $83.93 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose by 76 cents to end the day at $84.03 per barrel in New York on Tuesday.

In currencies, the euro rose 0.2 percent to $1.2706.