Barefoot Investor: Asian shares lifted by Europe bank plans

HONG KONG: Asian shares began Monday on a high after France and Germany said they had agreed a plan to support Europe's banks, while US jobs data also provided some lift.

However, dealers remained cautious after Wall Street finished last week with a loss and Fitch downgraded the debt ratings of Italy and Spain.

Hong Kong gained 0.66 per cent in the first few minutes, Sydney gained 1.20 per cent, Seoul was 1.10 per cent higher and Shanghai, which was closed last week for the Golden Week holiday, was 0.16 per cent up.

Tokyo and Taipei were closed for public holidays.

French President Nicolas Sarkozy and German Chancellor Angela Merkel put on a united front Sunday and vowed after talks in Berlin a response to Europe's debt crisis within weeks.

Without announcing concrete details, Sarkozy said there would be "lasting, global and quick responses before the end of the month", amid rampant fears of a crippling credit crunch.

The announcement comes a few weeks ahead of a G20 summit in Cannes, and Sarkozy said Europe must "arrive at the (meeting) united and with the problems resolved".

It also came amid concerns that France and Germany, the two main powerhouses of the eurozone, were at odds over the best way to recapitalise the region's banks.

Germany, the effective eurozone paymaster, wants banks that are under pressure to turn to investors for funds before appealing for national or European cash.

It wants the EU's 440-billion-euro ($589-billion) European Financial Stability Facility (EFSF) bailout fund to intervene only as a last resort.

But France, fearful of losing its top-notch AAA credit rating, would rather dip into European funds than its own coffers.

However, Sarkozy said Sunday that "agreement is complete".

"An economy is not prosperous without stable and reliable banks," he told reporters after the talks.

Merkel also said the two sides had "decided on doing what is necessary to recapitalise (the) banks in order to assure the granting of credit to the economy".

Also on Sunday, Belgium and Luxembourg said they had reached a deal to dismantle troubled bank Dexia, the first victim of the eurozone crisis.

Belgium's finance minister said Brussels had, in accordance with French wishes, agreed to guarantee 60 per cent of the so-called "bad bank" assets, compared with 36.5 per cent for France and 3.5 per cent for Luxembourg.

The news from Europe added to the upbeat data from the United States, which showed the economy created a better-than-expected net nonfarm 103,000 jobs in September.

The Labour Department also revised upward the two previous months' job creation numbers, indicating that employment in the faltering economy had more momentum than previously believed.

The July payrolls totalled 127,000, not the 85,000 initially estimated, while August was revised from zero to 57,000.

However, Wellington-based ANZ bank strategists said in a note: "Some optimists are hailing an end to the risk of recession for the US, but given this data is volatile and prone to large revisions, we'll not make any significant judgements from one outturn."

But putting downward pressure on markets was Fitch's decision Friday to cut it ratings on Italy and Spain, citing the increasing pressure on them as the eurozone crisis makes it harder for them to raise cash.

"The downgrade reflects the intensification of the eurozone crisis that constitutes a significant financial and economic shock which has weakened Italy's sovereign risk profile," Fitch said.

The single currency was at $1.3454 against the dollar, from $1.3375 late Friday in New York, and at 103.25 yen, from 103.10 yen.

The dollar was at 76.70 yen, from 76.73.

Crude oil prices were up in Asia Monday with New York's main contract, light sweet crude for delivery in November, adding 93 cents to $83.91 a barrel.

Brent North Sea crude for November delivery gained 53 cents to $106.41.

By 0210 GMT (10.10am Singapore time) gold was at $1,652.10 an ounce, up from $1,653.97 at 1045 GMT (6.45pm Singapore time) on Friday.(


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