Tuesday, July 26, 2011

Asia stocks gain as US debt compromise anticipated (AP)

SEOUL, South Korea ? Asian stocks mostly rose Tuesday as investors anticipated a compromise would resolve the U.S. debt deadlock even as President Barack Obama described his country as being dangerously close to default.

The United States has until Aug. 2 ? now just a week away ? to reach a deal to increase the amount the country can borrow or face not being able to pay its bills. That has led to fears the world's largest economy could default on its financial obligations and spread shock waves throughout the world.

Both Democrat Obama and Speaker of the House of Representatives, Republican John Boehner, spoke to Americans on Monday. Obama said a compromise was needed to avoid a "reckless and irresponsible" outcome. Boehner appeared to dig in his heels, saying Obama would not get what he seeks.

Japan's Nikkei 225 stock average rose 0.7 percent to 10,117.23. Hong Kong's Hang Seng Index gained 0.9 percent to 22,502.65 and South Korea's Kospi added 0.4 percent to 2,159.64.

China's Shanghai Composite Index advanced 0.1 percent to 2,690.33. The index fell 3 percent Monday following a weekend high-speed train crash that killed at least 39 people.

Markets in Australia, Taiwan, Indonesia, Singapore and Thailand also rose, while the Philippines and New Zealand fell.

"Most investors view that at the last minute the two parties can get some sort of compromise," said Peter Lai, director at DBS Vickers in Hong Kong, explaining the resilience of Asian markets in the face of Washington's gridlock.

Democrats are seeking a combination of spending cuts and revenue increases to solve the debt crisis, while Republicans have vowed that any compromise must not include higher taxes.

The probability is increasing that the U.S. will see its AAA credit rating downgraded, Credit Agricole Corporate & Investment Bank said in a report.

But it added that a delay in reaching a compromise on the debt ceiling beyond the Aug. 2 deadline is not expected to lead to a default on U.S. Treasuries because the Treasury Department would prioritize its payments to make sure interest on its debt is paid.

Stocks were lackluster in Europe on Monday and fell on Wall Street after Republican and Democratic leaders offered competing proposals to avoid default.

The Dow Jones industrial average fell 88.36 points, or 0.7 percent, to close at 12,592.80, though pared earlier losses of 145 points. Broader indexes also fell, with the Standard & Poor's 500 index declining 0.6 percent to 1,337.43. The Nasdaq composite index lost 0.6 percent to 2,842.80.

In currencies, the dollar fell to 78.06 yen in Asia from 78.25 late Monday in New York. The euro strengthened to $1.4478 from $1.4380.

Benchmark oil for September delivery was up 23 cents to $99.43 a barrel in electronic trading on the New York Mercantile Exchange. Crude lost 67 cents to settle at $99.20 on Monday.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110726/ap_on_bi_ge/world_markets

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