Asian markets mostly higher as stronger US finish helps offset European debt fears

HONG KONG (AP) — Asian stock markets were mostly higher Thursday after two days of selling, but investors were treading cautiously after Spain became the third European country this week hit with a downgrade of its debt.

Most markets gained less than 1 percent. The dollar, meanwhile, slipped against the euro and the yen, and oil prices hovered above $83 a barrel.

The European debt crisis spread Wednesday when Standard & Poor's lowered its credit rating for Spain amid concerns about the country's growth prospects following the collapse of a construction bubble. The downgrade, coming just a day after S&P slashed its credit ratings on Greece and Portugal, escalated fears of a contagion that could raise borrowing costs for European countries, chill the credit markets and derail an economic recovery.

However, sentiment was helped by an overnight gain on Wall Street, where stocks finished higher after the Federal Reserve offered modest reassurances about the world's largest economy.

The central bank, at the end of a two-day policy meeting, said the labor market is "beginning to improve" and it noted that housing starts have edged up. It expects to keep rates low for an "extended period" to help strengthen the economy.

Hong Kong's Hang Seng was flat at 20,950.42 and South Korea's Kospi shed 0.5 percent to 1,724.81.

Elsewhere, Shanghai's market gained 0.3 percent, India's benchmark edged up 0.2 percent, and Singapore's index was up 0.6 percent.

Japan's market was closed for a holiday.

In currencies, the dollar traded at 93.92 yen compared to 94.16 yen. The euro, after tumbling to a one-year low against the greenback, stabilized and rose to $1.3233 from $1.3203.

The benchmark oil contract shed 5 cents to $83.17 a barrel in Asian trade.

In Europe Wednesday, markets suffered another loss even as investors held out hope the key actors in the Greek debt drama will soon rescue the debt-laden country. Germany, the International Monetary Fund and the European Central Bank all suggested the bailout funds agreed to earlier this month would soon be released.

But analysts said the respite in most markets was unlikely to last because of so much uncertainty surrounding Greece and other European nations struggling with high debt loads and deficits,

"Fiscal issues in the eurozone's periphery will come back to haunt investors, and we have likely not seen the worst of it yet," Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong, said in a note.

On Wall Street overnight, the Dow rose 53.28, or 0.5 percent, to 11,045.27.

The Standard & Poor's 500 index rose 7.65, or 0.7 percent, to 1,191.36, while the Nasdaq composite index rose 0.26, or 0.01 percent, to 2,471.73.