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Asian markets up, but traders nervous over Greece

Asian markets up, but traders nervous over Greece

Asian markets rose Tuesday after European leaders agreed a treaty aimed at ending huge deficits, although traders remained nervous as Greece continued talks to slash its debt mountain.

Tuesday 31 January 2012, 11:03AM

Upbeat Japanese data also provided some support to the region but the euro was back under pressure as the Greek issue rumbled on and traders looked for safer assets.

Tokyo rose 0.39 percent by noon, Hong Kong added 0.83 percent, Sydney gained 0.20 percent, Seoul was 0.79 percent stronger and Shanghai was 0.34 percent up.

On Monday in Brussels 25 of the 27 European Union countries adopted a new pact -- to be formally signed in March -- that will require governments to introduce laws on balanced budgets and impose near automatic sanctions on those who violate deficit rules. Britain and the Czech Republic refused to sign.

The leaders also set up a permanent rescue fund to begin operations a year early in July, although they will discuss prior to that whether to boost its size from an initial 500-billion-euro target.

However, while the plan has been introduced to avoid future deficits Athens remains locked in talks with its creditors to get them to agree to take a 50 percent hit on their investments.

The deal -- which has been held up by a row over the amount of interest Greece must pay on the remainder of the debt -- is key to the country getting access to a second bailout from the European Union and European Central Bank.

While Prime Minister Lucas Papademos has expressed confidence an agreement will be met, traders remained on edge.

Ric Spooner, chief market analyst at CMC Markets said in a note: "Markets now appear to have reached a level where they need formal confirmation that an agreement on debt restructure has been struck with private investors and that a second rescue funding package will be provided to the Greek government.

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"After the rally of recent weeks, equity markets may remain nervous at current levels until these issues have been formally resolved," he said, according to Dow Jones Newswires.

A call by Germany for the Athens government to be placed under wardenship received scant backing from other European leaders, and Greece's education minister called the idea "the product of a sick imagination".

In Tokyo data showed Japan's annual industrial output fell 3.5 percent in 2011 overall -- hit by the March 11 quake-tsunami and floods in Thailand -- but rose by a more-than-expected 4.0 percent on month in December.

It also showed household spending saw its first increase since the March disasters.

The euro bought $1.3151 and 100.43 yen in early Asian trade, compared with $1.3134 and 100.34 yen in New York late Monday. The dollar rose to 76.35 yen from 76.67.

On oil markets New York's main contract West Texas Intermediate crude for delivery in March gained 52 cents to $99.30 per barrel and Brent North Sea crude for March settlement was up 45 cents at $111.20.

Gold was at $1,736.40 an ounce at 0330 GMT, against $1,735.90 late Monday.


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