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GLOBAL MARKETS-Spanish budget buoys European shares and euro

by on September 28, 2012 7:44 am GMT
 

Fri Sep 28, 2012 3:44am EDT

* FTSEurofirst 300 up 0.3 pct, buoyed by Spain sentiment

* Euro up 0.1 pct vs dlr, dlr broadly defensive

* Oil, gold rise

* Spanish bank audit, French budget in focus

By Marc Jones

LONDON, Sept 28 (Reuters) – European shares and the euro
rose alongside commodities and other risk assets on Friday, as
financial markets welcomed Spain’s spending cuts and attention
turned to an assessment of its troubled banks and French budget
plans.

Markets were buoyed by expectations that the tough Spanish
budget is a prelude to an EU aid programme that will allow the
European Central Bank to try to reduce its high borrowing costs
by buying its bonds.

The optimism about the Spanish government was not
universally shared. “They are making the right noises, but
whether they can actually put these things into practice is a
different matter in a country with no growth and 25 percent
unemployment,” one London-based bond trader said.

“I’m going to remain sceptical, but the market has given
them the benefit of the doubt.”

The FTSEurofirst 300 index of top European shares
opened 0.3 percent higher as London’s FTSE 100, Paris’s
CAC-40 and Frankfurt’s DAX began the day up
roughly 0.2 percent.

The euro, which has fallen more than 1.6 percent
again the dollar in the last two weeks as progress in tackling
the euro zone crisis has slowed, was up 0.1 percent on the day
with the dollar also on the defensive against other leading
currencies.

Brent oil prices edged up 0.6 percent to $116.66 and
London copper rose 1 percent to $8,264 a tonne. Spot
gold hovered at a one-week high of $1,778.99 an ounce,
leaving it on course for a sixth straight week of gains.

Bund futures, seen as a safe haven asset, were 14
ticks lower at 141.43.

The results of an independent audit of Spanish banks will be
published later in the day and Moody’s Investors Service is
expected to finish its rating review on the sovereign, which may
lose its investment grade status.

French President Francois Hollande puts his fiscal
credibility on the line on Friday when he delivers the country’s
toughest budget in 30 years. His first annual budget, to be
presented to the cabinet mid-morning, must make 30 billion euros
($39 billion) in savings to keep deficit-cutting promises.