LONDON (AP) ? European stock markets rallied Tuesday after Spain raised more money than anticipated in a pair of short-term bond auctions and as investors awaited a raft of U.S. earnings.

While worries over Spain remain, evidenced by a big increase in the interest rate the country had to pay investors to take ?3.2 billion ($4.2 billion) of its short-term debt, markets were cheered by the news that it found more than enough interested buyers.

The amount raised was more than the ?3 billion top target initially planned, and that helped lower the yield on Spain’s ten-year bonds in the markets by 0.14 of a percentage point to 5.88 percent. The benchmark IBEX stock index rose 1 percent.

Spain has become the main source of concern in Europe‘s debt crisis over recent weeks as investors worry over the government’s ability to push through a raft of austerity measures at a time when the economy is in recession and unemployment stands at a startling 23 percent.

The yield on the country’s ten-year bond has spiked above 6 percent in recent days, not far off the 7 percent rate that eventually forced Greece, Ireland and Portugal into seeking financial help from their partners in the eurozone.

Though Tuesday’s auction results were encouraging, Craig Erlam, a market analyst at Alpari, said demand for longer-term debt is a closer indicator investor confidence. “The big test now comes on Thursday when they have announced a bond auction for 2 and 10 year bonds.”

A surprisingly upbeat German investor survey from the ZEW institute also helped shore up markets in Europe heading into the run of U.S. earnings later, which may temporarily divert attention from Europe’s debt crisis. Goldman Sachs Group Inc. and Coca-Cola Co. will take center stage before Wall Street’s open. After the U.S. close, Intel Inc. also unveils results.

“With the U.S. earnings season in full flow, there is plenty to keep investors occupied,” said Chris Beauchamp, market analyst at IG Index.

In Europe, shares rallied alongside Spain’s IBEX. The FTSE 100 index of leading British shares was up 0.7 percent at 5,708 while Germany’s DAX rose 1 percent at 6,690. The CAC-40 in France was 1.4 percent higher at 3,248.

The upbeat tone in European markets also helped support the euro, which was trading 0.1 percent higher at $1.3146. Earlier it had risen to $1.3170 after a surprise increase in inflation in the 17-country eurozone to 2.7 percent in the year to March reined in expectations that the European Central Bank will cut interest rates again anytime soon.

Wall Street was poised for a solid opening too, with both Dow futures and the broader S&P 500 futures up 0.3 percent.

Earlier in Asia, Japan’s Nikkei 225 index fell less than 0.1 percent to close at 9,464.71 while South Korea’s Kospi index slipped 0.4 percent to 1,985.30 and Hong Kong’s Hang Seng lost 0.2 percent to 20,562.31. Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index falling 0.9 percent to 2,334.99. The Shenzhen Composite Index lost 1.3 percent to 936.74.

Oil prices tracked equities higher ? benchmark oil for May delivery was up 75 cents to $103.68 per barrel in electronic trading on the New York Mercantile exchange.

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Pamela Sampson in Bangkok contributed to this report.

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A masked man is reflected on an electronic stock board at a securities firm in central Tokyo, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment. (AP Photo/Koji Sasahara)

A masked man is reflected on an electronic stock board at a securities firm in central Tokyo, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment. (AP Photo/Koji Sasahara)

A currency trader walks through the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment. South Korea’s Kospi was 1.3 percent lower at 1,939.90. (AP Photo/ Lee Jin-man)

A woman walks screens at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment. South Korea’s Kospi was 1.3 percent lower at 1,939.90. (AP Photo/ Lee Jin-man)

Currency traders look at monitors at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, Jan. 30, 2012. Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment. South Korea’s Kospi was 1.3 percent lower at 1,939.90. (AP Photo/ Lee Jin-man)

BEIJING (AP) ? Asian stocks rose Tuesday as traders watched for a possible deal to cut Greece’s debts and Japanese factory output rebounded.

Benchmark oil rose above $99 per barrel while the dollar fell against the euro and the yen.

Tokyo’s Nikkei 225 rose 0.1 percent to 8,806.06 after data showed December industrial activity rose 4 percent over the previous month. Hong Kong’s Hang Seng gained 0.7 percent to 20,304.48 and Seoul’s Kospi was up 0.1 percent at 1,942.82.

Traders watched Europe, a major export market, following reports Greece and its creditors were close to a deal to cut its debts. Also Monday, European leaders agreed on a new treaty meant to stop overspending and put an end to the region’s crippling debt woes.

“Everyone is watching the European summit and how the Greek debt crisis comes out,” said Jackson Wong at Tanrich Securities in Hong Kong. “The general atmosphere is to play a wait-and-see game.”

China’s benchmark Shanghai Composite Index was up 0.2 percent at 2,289.42 ahead of Wednesday’s release of a key manufacturing index. Investors are hoping for a loosening of credit curbs or other measures to boost growth if it shows activity is slowing amid lackluster global demand for Chinese goods.

Benchmarks in Taiwan, Thailand, Indonesia and India rose while Singapore, Malaysia and New Zealand fell. Australia’s S&P/ASX 200 fell 0.2 percent to 4,266.10.

European markets tumbled Monday on concerns Greece’s financial problems might not be solved even if creditors agree to cancel part of its debt.

Under a tentative agreement, investors holding 206 billion euros ($272 billion) in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate. When the bonds mature, Greece would have to pay its bondholders only 103 billion euros.

France’s CAC-40 shed 1.6 percent while Britain’s FTSE 100 and Germany’s DAX both lost 1 percent.

Wall Street fell in early trading but Asian investors were encouraged after the Dow Jones industrial average recovered most of its losses to close down just 0.1 percent. The Standard & Poor’s 500 lost 0.8 percent.

Borrowing costs for European countries with the heaviest debt burdens shot higher. The two-year interest rate for Portugal’s government debt jumped to 21 percent after trading around 14 percent last week.

Portugal may become the next country “where default is a real possibility,” said Martin Hennecke of Tyche Group in Hong Kong.

“The euro zone crisis is far from being fixed at all. Italy and Spain are effectively bankrupt as well,” Hennecke said. “For Asia, that means there is huge uncertainty in terms of export markets.”

The treaty agreed to Monday by all European Union governments except Britain and the Czech Republic includes strict debt brakes and is aimed at making it harder for violators to escape sanctions. The 17 countries in the eurozone hope the tighter rules will restore confidence in their joint currency.

The agreement comes as richer countries such as Germany are losing patience with giving Athens loans, saying the Greek government is not carrying out reforms and spending cuts fast enough. A German official proposed having an EU monitor oversee Greek spending but that idea was quickly rejected at Monday’s meeting in Brussels.

Benchmark oil for March delivery gained 37 cents to $99.39 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 78 cents to end at $98.78 per barrel on the Nymex on Monday.

In currencies, the euro rose to $1.3191 from $1.3114 late Monday in New York. The dollar fell to 76.17 yen from 76.25 yen.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-01-31-World-Markets/id-b9fee620a42f46399de36ea4b70784a8

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