European markets and euro gain ground (AFP)

LONDON (AFP) – Europe's main stock markets and the euro edged higher on Tuesday, thanks partly to receding concerns over the impact of unrest in the Middle East and North Africa, analysts said.

London's FTSE 100 index of top shares rose 0.18 percent to 6,005.22 points nearing the half-way stage. The Paris CAC 40 added 0.27 percent to 4,122.89 points and Frankfurt's DAX 30 firmed 0.61 percent to 7,315.32 points.

The pan-European Stoxx 50 index of top eurozone companies was up 0.26 percent to 3,031.79.

"European bourses continued to reclaim lost ground on Tuesday with the FTSE 100, DAX and CAC all climbing in early trading, led chiefly by demand in heavyweight mining shares," said City Index analyst Joshua Raymond.

"Investor concerns regarding the crisis in the Middle East and North Africa seem to have abated of late, a fact helped no end by the stabilising of crude oil prices.

"Should crude prices continue to consolidate, this may open up potential for stronger equity moves as traders (review) valuations."

In foreign exchange deals on Thursday, the euro rose as high as $1.3855, compared with $1.3803 late in New York on Monday, as investors absorbed a series of economic data releases.

Eurozone inflation rose to 2.4 percent year-on-year in February from 2.3 percent in January, according to official EU estimates on Tuesday.

That rate was above the European Central Bank's medium-term inflation target of slightly below two percent across the 17-nation bloc.

Rising inflation pressures will likely overshadow an ECB monetary policy meeting on Thursday.

But "as the rise in inflation so far has been driven largely by higher energy prices, it still looks premature for the ECB to move to an outright shift in its statement regarding inflation risks at Thursday's meeting," said HSBC economist Janet Henry.

Rising inflation has fanned speculation that the ECB could advance a rate hike that many currently expect early in the third quarter of this year.

At the same time, the European Commission raised its eurozone 2011 growth forecast to 1.6 percent on Tuesday but warned that markets remain fragile and unrest in the Arab world threatens to drive up inflation.

The European Union's executive arm, which last November had forecast 2011 growth of 1.5 percent, said the improved outlook was supported by "better prospects for the global economy and upbeat EU business sentiment."

But the recovery is expected to remain uneven among the 17 nations that share the euro, with the export-driven German economy leading the pack while debt-stricken southern countries lag behind as they slash spending.

In Asian trade earlier Tuesday, markets were also higher with Tokyo performing strongly after a rally on Wall Street and as oil prices stabilised.

Tokyo rose 1.22 percent as exporter stocks were boosted by a weaker yen -- a result of dealers moving out of the safe-haven Japanese currency amid renewed risk appetite.

Hong Kong rose 0.25 percent while Shanghai gained 0.47 percent after a top official suggested inflation would fall in February, boosting hopes that further Chinese interest rate hikes in the near term can be avoided.

Sydney ended lower however after the Australian central bank said it would keep rates on hold at 4.75 percent.

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Calm returns to European markets ahead of weekend (AFP)

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Calm returns to European markets ahead of weekend (AFP)

LONDON (AFP) – European stock rose on Friday as some calm returned to global financial markets after a rocky week driven by Middle East fears while London resumed trading after a technical glitch closed the bourse for the morning.

In early afternoon deals, the Paris CAC 40 was up 1.21 percent to 4,058.22 points and Frankfurt's DAX 30 added 0.39 percent to 7,158.27 points.

London's FTSE 100 index of top shares rose 0.86 percent to 5,971.18 points, having reopened at 12H15 GMT following an outage which halted trading for more than four hours.

Markets suffered heavy losses earlier this week as investors flocked to the safe-haven Swiss franc and yen amid violent unrest in Libya that sent oil prices rocketing close to $120 per barrel.

"A little bit of calm descends on the markets," said research director Kathleen Brooks at online trading site Forex.com on Friday.

"After taking a battering this week, risky assets are getting a little respite today. Stocks are higher, the (Swiss franc) and yen are off their highs and the dollar ... is finding support."

In foreign exchange trade, the European single currency edged up to $1.3808 from $1.3797 late Thursday as traders also bet on rising interest rates to combat building inflationary pressures in the eurozone.

London's technical glitch, meanwhile, followed similar outages in both Milan and Paris earlier this week, and comes amid a fast-moving flow of company earnings and economic data against a backdrop of nerves over the unrest in Libya.

"At a time of uncertainty in the markets, where traders are having to keep on their toes with the situation in Libya, the last thing they need is an unexpected halt to trading," City Index analyst Joshua Raymond said.

Britain's economy shrank by a worse-than-expected 0.6 percent in the fourth quarter of 2010, official data showed on Friday, hit partly by the impact of harsh wintry weather.

"Gross domestic product (GDP) contracted by 0.6 percent in the fourth quarter of 2010, revised down from the previously estimated fall of 0.5 percent," the Office for National Statistics said in statement.

That marked the largest quarterly drop in GDP -- the total value of goods and services produced in the economy -- since the second quarter of 2009.

The sharp contraction followed expansion of 0.7 percent in the third quarter of last year. Market expectations had been for no change to the initial estimate.

On the corporate front, Britain's state-rescued bank Lloyds on Friday posted annual pre-tax profits of £2.2 billion (2.6 billion euros, $3.6 billion), recovering from a steep loss as it slashed bad debts.

International Airlines Group, formed last month via the merger of British Airways and Iberia, posted modest 2010 net profits, shrugging off the impact of strikes and severe weather conditions late in the year.

The results were calculated on a pro-forma basis as if British Airways and Iberia had already been trading as a combined group.

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Summary Box: Libya unrest rattles markets (AP)

OIL SPIKE: Oil prices jumped 6 percent to $95 a barrel, their highest level in two years, after clashes between protesters and forces loyal to the Libyan leader Moammar Gadhafi threatened oil production from the world's 15th largest oil exporter.
PLANE PAINS: Higher fuel costs hurt airline stocks. Delta Air Lines Inc., United Continental Holdings Inc. and US Airways Group Inc. all dropped by 5 percent or more.
THE INDEXES: The Dow Jones industrial average sank 178 points to 12,212. The S&P 500 index fell 27 to 1,315. The Nasdaq fell 77 to 2,756.42.
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Egypt delays stock market's reopening (AP)

By TAREK EL-TABLAWY, AP Business Writer Tarek El-tablawy, Ap Business Writer – Tue Feb 22, 9:08 am ET
CAIRO – Egypt's stock exchange postponed its already long-delayed reopening until next week and markets in the Gulf Arab region posted their third consecutive day of declines as unrest in Libya and elsewhere in the region battered already fragile investor confidence in the Mideast.
Standard & Poor's, meanwhile, became the second credit agency in as many days to cut Libya's ratings, citing the kind of violence that has been unseen in Moammar Gadhafi's nearly 42-year leadership of that OPEC member state.
The Egyptian Exchange's decision to postpone its relaunch would mean that the market will have been closed for a month, assuming it restarts on Feb. 27. The exchange, in an e-mailed statement, said the decision followed consultations with the Egyptian Financial Services Supervisory Authority and brokerage houses. It did not specify a date for the relaunch.
The decision appeared to reflect that continued anxiety in Egypt about the country's economic woes following 18 days of protests that toppled Hosni Mubarak were being compounded by broader unrest in the region.
Unrest also has hit Yemen and Bahrain, putting the demonstrations on the other side of a causeway from Saudi Arabia.
The Dubai Financial Market's main index closed down 2.44 percent, to 1,479 points, while Saudi Arabia's TASI index rebounded from losses of over 1 percent earlier in the day. But the TASI still closed down 0.35 percent, or 6,277 points.
"You've got a political risk that is being leveled on local and regional equity markets. It's increasing day by day as we see more violence," particularly in Libya, said Haissam Arabi, chief executive of Gulfmena Alternative Investments, a fund management firm in Dubai.
"This is a situation where sentiment takes precedence over science and fundamentals," Arabi said.
In Dubai, Emaar Properties, the developer behind Burj Khalifa, the world's tallest building, closed down 2 percent, hitting 2.92 Emirati dirhams. Courier Aramex, meanwhile, saw its shares slide 7.36 percent to 1.51 dirhams.
Abu Dhabi's benchmark index closed down 1.57 percent, to 2,579 points, with the construction and real estate sectors recording the biggest declines.
Qatar's exchange was off 3.57 percent, bringing its year-to-date losses to more than 5.3 percent. The country, which is poised for a construction boom as it prepares to host the World Cup in 2022 and has some of the world's biggest natural gas reserves, has been one of the few in the region able to post staggering GDP growth figures, even during the global financial meltdown.
While Arabi said the region's markets are driven largely by retail investors, big institutional buyers overseas are also spooked by the continuing unrest.
"Foreign investors feel as though they really can't tell the difference" between countries in the Middle East and North Africa, he said. "The level of awareness, especially when it comes to politics, is really only what people see on CNN."
As long as the unrest keeps up, Arabi believes there could be further pressure to sell off stocks in the region.
The declines built on losses that have accrued since Sunday and come as ratings agencies take an increasingly critical look at the financial fundamentals of many of the countries in the region.
A day after Fitch cut Libya's ratings, S&P followed suit. The agency cut Libya's long-term sovereign credit rating to BBB+ from A-, placed all of its Libya ratings on credit watch negative and warned that additional cuts could be in the offing.
S&P said the cuts "reflect our reappraisal of political risks in Libya," and that it expects the violence to continue.
"In our view, the longer the unrest continues, the higher the risk of political instability spreading across the country," S&P said.
So far, credit agencies have cut ratings for several Arab nations, including Egypt, Jordan and Bahrain, citing the ongoing unrest and its potential impact on the countries' respective economies.
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AP Business Writers Adam Schreck in Dubai and Pan Pylas in London contributed.
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