European stocks buoyed by BP, Spanish bond sale

By COLLEEN BARRY AP Business Writer

MILAN (AP) - European stocks rose Thursday after Spain successfully sold bonds, easing fears over its debt burden, and as BP rallied after reaching a deal on how to pay for damage from the Gulf of Mexico oil spill.

While Asian stocks closed somewhat lower, European investors breathed a sigh of relieve after Spain raised nearly euro3.5 billion ($4.3 billion) in an oversubscribed sale of bonds, although at higher interest rates.

Britain's FTSE 100 was trading up 0.71 percent at 5274.99, Germany's DAX rose 0.44 percent to 6218.32 and France's CAC-40 grew by 0.51 percent to 3694.69.

The euro rose to $1.2376 from $1.2314 in New York late Wednesday as the Spanish auction showed the country could still raise money on markets despite worries about its large debt load and its ability to enforce austerity measures.

Wall Street was poised for modest gains on the open, with Dow futures up 33 points at 10,409.

Momentum was earlier boosted by news that oil company BP had reduced uncertainty about its liabilities with a deal to cancel dividend payments and set up a $20 billion fund. Its shares were up 9.4 percent at 368.7 pence ($5.42) in London.

But David Jones, Chief Market Strategist, IG Index warned that analysts still see risk in BP shares "suggesting this latest rebound may not be the final twist in the tale."

Positive economic data from Britain also helped drive markets. Retail sales in Britain rose 4.4 percent in the year to May, while vehicle production soared by 59 percent, signs that the country's recovery from a deep recession is continuing for the third consecutive quarter.

Looking ahead, investors were watching an EU summit in Brussels, where the European Union's president called on the leaders of the bloc's 27 states to tackle long-term problems with their economies and overhaul budget rules.

In Asia, Japan's Nikkei 225 stock average dropped 67.75 points, or 0.7 percent, to 9,999.40 as investors moved to lock in gains from Wednesday's 1.8 percent jump, when the index finished above the key 10,000 level for the first time in almost a month.

Australia's S&P/ASX 200 lost 0.7 percent to 4,527.30 as miners retreated. The Shanghai Composite index fell 0.4 percent to 2,575.30 with investors holding back ahead of the launch of Agricultural Bank of China's mammoth share listing, after a five-day closure for public holidays.

Benchmarks in Singapore and New Zealand were also in negative territory.

Meanwhile, Hong Kong's Hang Seng rose 0.4 percent to 20,138.40. Stocks in Taiwan, Thailand, Malaysia and South Korea rose as well.

Overnight in New York, the Dow Jones industrials rose 0.05 percent to 10,409.46 after news of BP's funding agreement. The market began the day by falling on news that home construction and applications for building permits slumped in May.

The S&P 500 fell 0.06 percent to 1,114.61.

In currencies, the dollar weakened to 91.25 yen from 91.37 yen late Wednesday.

Benchmark crude for July delivery was down 31 cents at $77.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 73 cents to settle at $77.67 on Wednesday.