Recovery hopes buoy world markets for second day

(AP) — World stock markets mostly rose Tuesday as investor sentiment was supported for the second day running by stronger than anticipated manufacturing surveys. The euro, meanwhile, rose slightly as fears of a Greek debt default eased.

In Europe, Germany's DAX was up 22.80 points, or 0.4 percent, at 5,677.28 while France's CAC-40 rose 30.87 points, or 0.8 percent, to 3,792.88. Britain's FTSE 100 index British shares underperformed its peers in Europe, rising only 9.14 points, or 0.2 percent, to 5,256.55, largely because shares in heavyweight oil company BP PLC fell over 4 percent after it reported lower than anticipated fourth quarter earnings.

On Wall Street, the Dow Jones industrial average was up 5.89 points, or 0.1 percent, at 10,191.42 soon after the open while the broader Standard & Poor's 500 index rose 1.13 points, or 0.1 percent, to 1,090.32.

Investors appear to be in a more optimistic frame of mind in the wake of encouraging manufacturing surveys from around the world Monday and ahead of a raft of economic news over the second half of the week, culminating Friday with the U.S. nonfarm payrolls report for January. Three consecutive increases in weekly jobless claims data have stoked worries about the report, which often sets the stock market tone for a week or two.

Australia's central bank surprised markets by keeping its main interest rate unchanged at 3.75 percent — it was widely expected to raise them for the fourth time in a row to 4 percent. Its failure to do sent the Australian dollar plunging 1 percent against the dollar as investors priced in lower returns.

While noting that the impact of its previous three hikes was "limited," the Reserve Bank of Australia cited tight credit conditions, a reduction in the policy stimulus in China, the rising Australian dollar and rising sovereign credit risks around the world for its decision.

Worries about public finances has been particularly evident in Europe over the last few weeks, as the new Greek government tries to reassure bond market investors that it can get a grip on the country's public finances.

On Wednesday, the European Commission is due to pronounce on the Greek deficit reduction plan and all indications are that it will give the Greek government the thumbs-up, subject to some further spending cuts.

Those expectation have helped Greek bond yields drop and the spread between Greek and German yields narrow for the third day running — clear signs that investors are getting less twitchy about holding on to Greek debt.

The euro steadied somewhat, rising another 0.2 percent to $1.3951 — at one stage on Monday, the euro had dropped to a six and a half month low of $1.3854.

"Without doubt EMU faces further significant hurdles this year in view of the budget problems of Greece, Spain and Portugal but for now the market is coming to terms with the notion that the system will be maintained intact and that the higher yields of these countries may thus offer good value," said Jane Foley, research director at Forex.com.

On Thursday, investors will focus in on European Central Bank president Jean-Claude Trichet when he delivers his monthly press conference following the expected decision to keep European rates unchanged at 1 percent.

Earlier in Asia, Shanghai's index ended 0.2 percent lower amid speculation of more government initiatives to clamp down on bank lending, while South Korea's Kospi fell 0.7 percent. Markets in Taiwan and Singapore also lost ground.

Among Asia's best performing markets, Japan's Nikkei 225 stock average jumped 166.07, or 1.6 percent, to 10,371.09. Hong Kong's market closed up 0.1 percent in volatile trade.

Oil prices rose back above $75 a barrel with benchmark crude for March delivery up 73 cents at $75.16 a barrel. The contract rose $1.54 to settle at $74.43 on Monday.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.