LONDON ? Markets rose Monday on hopes that Europe's leaders will agree on a plan to restore long-term confidence in the euro, saving it from collapse and averting global economic chaos.
A crucial week for the future of the euro kicks off later with a meeting of German Chancellor Angela Merkel and French President Nicolas Sarkozy in Paris. The two are expected to discuss how to achieve closer political and economic union of the 17 euro countries, including stricter budgetary oversight.
Merkel wants to change the basic EU treaty to reflect the tougher rules on euro countries and make them enforceable, while Sarkozy is resisting giving up more powers to Brussels, especially since he faces a tough re-election campaign in April. Sarkozy is thought to prefer an intergovernmental deal between the 17 euro countries.
The markets are hopeful that, given the gravity of the situation afflicting the eurozone, the two leaders will come up with a common proposal for tighter integration on budget matters. Analysts say that such a plan could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.
"Markets have gained ground ahead of a Franco-German summit which is supposed to resolve some long-standing issues between the two continental titans," said Chris Beauchamp, market analyst at IG Index.
In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 5,582 while Germany's DAX rose 0.9 percent to 6,133. The CAC-40 in France was 1.2 percent higher at 3,202.
The biggest gainer was Italy's FTSE MIB, which was trading 2.2 percent higher, a day after the government led by Premier Mario Monti agreed big austerity and growth-boosting measures. They are to be presented to a skeptical Parliament later Monday.
Monti is to brief both Parliament chambers on the package, which includes euro30 billion ($27 billion) of spending cuts and tax hikes, euro10 billion of which will be reinvested to boost anemic growth.
His government agreed Sunday to slap taxes on property and luxury goods, increase the age at which retirees can draw pensions, trim the cost of Italy's political class and give incentives to companies that hire women and young workers.
Significantly, the pressure on Italy eased in bond markets. The country's ten-year bond yield was down 0.40 of a percentage point to 6.16 percent.
Italy is the eurozone's third-largest economy and is considered too big to be bailed out. Its borrowing rates have in recent weeks hovered around the 7 percent mark, a level that eventually forced Greece, Ireland and Portugal to seek financial help. By comparison, bond yields in Germany, Europe's largest and most stable economy, are roughly 2 percent.
Wall Street was poised for a stronger opening, too ? Dow futures were up 1 percent at 12,120 while the broader Standard & Poor's 500 futures rose 1.1 percent to 1,257.
The upbeat tone in markets helped the euro advance 0.3 percent to $1.3448 and the main New York oil contract rise 83 cents a barrel to $101.79.
Earlier in Asia, Japan's benchmark Nikkei 225 index added 0.6 percent to close at 8,695.98 while Hong Kong's Hang Seng rose 0.7 percent to 19,179.69. South Korea's Kospi ended 0.4 percent higher at 1,922.90.
Mainland Chinese shares lost ground on worries over the economic outlook. The benchmark Shanghai Composite Index lost 1.2 percent to 2,333.23.
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Pamela Sampson in Bangkok contributed to this report.
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