World stocks post gains in wake of deficit pledges

World markets rose Monday as investors were encouraged by the Group of 20 rich and developing nations' pledge to reduce budget deficits.

Leaders at the summit in Toronto this weekend endorsed a vow by rich nations to slash budget deficits in half by 2013, while downplaying strategic differences on fiscal stimulus versus fiscal austerity.

"As expected, nothing earth-shattering from the G20 meeting in Toronto, but policymakers have done a rather elegant job at containing the underlying conflict on growth versus fiscal consolidation that had pitted in particular Germany against the United States but also split the euro zone down the middle," said Unicredit chief economist Marco Annunziata.

President Barack Obama had in recent weeks called on world leaders to avoid premature spending cuts to avoid hurting a fragile global economic recovery.

However, Germany and many other European nations have made budget cuts a priority to avoid a repeat of Greece's near-bankruptcy and subsequent bailout.

Ben Potter, research analyst at IG Markets, called the progress on global deficit reduction "encouraging."

European markets broke a four-day run of losses. Britain's FTSE 100 stock index closed up 0.5 per cent at 5,071.68 while Germany's DAX was 1.43 per cent higher at 6,157.22. France's CAC-40 was up 1.61 per cent at 3,576.45.

The Dow Jones industrials average was up eight points at 10,152 half an hour to the closing bell, while Standard & Poor's 500 index was down one point to 1,076.

In Asia, Hong Kong's Hang Seng index climbed 0.2 per cent to 20,726.68 and benchmarks in South Korea, Taiwan, India, Indonesia and Singapore also posted mild gains.

Elsewhere, Japan's Nikkei 225 stock average fell 34.63 points, or 0.3 per cent to 9,693.94 as a strong yen weakened exporters. The market also awaited key economic data this week on industrial production, unemployment, and the Bank of Japan's "tankan" survey of business sentiment.

Australia's S&P/ASX 200 lost 0.7 per cent to 4,384.50 and the Shanghai Composite index shed 0.7 per cent to 2,535.28, on concern this week's huge IPO by state-owned Agricultural Bank of China Limited might depress prices.

Before the weekend, US bank stocks shot higher after an agreement on a financial regulation bill reassured investors that new rules won't devastate the profits of finance companies.

- AP