World shares rise, Portugal costs soar

2011-03-24 17:34

New York/London - World stocks rose for a sixth consecutive session on Thursday, recovering losses stemming from Japan's natural disasters, while Portugal's borrowing costs soared after its prime minister quit, making a bailout ever more likely.

Portugal's crisis and a downgrade to most Spanish banks' debt by rating agency Moody's knocked the euro, but it recovered early losses on a divergence in the euro zone and US interest rate outlooks.

Western warplanes hit Libya for a fifth night but have failed to stop Muammar Gaddafi's tanks from shelling rebel-held towns.

Stores in Tokyo were running out of bottled water after radiation from a damaged nuclear complex briefly made tap water unsafe for infants, while more nations curbed imports of Japanese food.

Equity markets were not affected, however, as bets on a continued economic recovery were coupled with the end to an upbeat quarter. Light volumes have lately underscored caution, however.

"We are at the quarter end, and the fact that we've had a good earnings season, continued expansion of the economy and also relatively cheap valuation (in stocks) looking forward is helping the market," said Peter Kenny, managing director at Knight Equity Markets in New Jersey.

The Dow Jones industrial average gained 47.87 points, or 0.40%, to 12 133.89. The Standard & Poor's 500 Index added 3.62 points, or 0.28%, to 1 301.16. The Nasdaq Composite Index rose 11.55 points, or 0.43%, to 2 709.85.

After Moody's downgrade pressured bank stocks and the overall market at the open, the FTSEurofirst 300 recovered to rise 0.7% to hit two-week highs, led by gains in two major British retailers.

Surveys on Thursday showed economic recovery continued in March, shrugging off Japan's disaster, although Middle East turmoil is pushing prices higher.

The MSCI All-Country index was last up 0.4%, rising for six successive trading days for a gain of more than 4%.

Brent crude oil dropped 0.6% below $115 a barrel on worries about Europe's debt woes but was still supported by concern over instability in the Middle East. US crude edged lower but was still above $105 per barrel.

EU in disarray

The premium investors demand to hold Portuguese debt rather than benchmark German Bunds hit euro lifetime highs.

Prime Minister Socrates resigned and warned of grave consequences for the country after parliament rejected his government's latest austerity measures aimed at avoiding a bailout. The resignation increased expectations Lisbon will seek international aid and threw into disarray a European Union summit expected to address the region's debt crisis.

Much of the anxiety over the euro zone's debt problems had been soothed by the prospect of a longer-term reinforcement of the EU bailout fund being agreed to at the summit, but this has now been delayed and a decision will likely come in June.

The euro was last up 0.3% against the dollar at $1.4123, having fallen earlier to a low of $1.4053 on trading platform EBS.

Still, the road ahead may be hard for the single currency.

"We think that no agreement at the EU summit on the bailout facilities should erode euro support further in the near term." said Valentin Marinov, currency analyst at Citigroup.

The yen was steady against the dollar at 80.90 yen, although market players are still wary Japan may intervene to sell the currency if the dollar breaches 80 yen.

Spot gold rose 0.2% to $1 438.45 an ounce, just shy of a record $1 444.40 set earlier in the month. Silver gained 0.7% to $36.37.