World stock markets post limited gains as hopes intensify for an end to Greece's debt crisis

BANGKOK - World stocks moved cautiously higher Thursday as confidence rose that Greece will get its next bailout despite an 11th hour snag and investors took in stride data showing inflation in China is heating up again.

Benchmark oil hovered below $99 per barrel while the dollar fell against the euro but rose against the yen.

European stocks rose early in the day as investors grew increasingly confident that Greece would finally be extricated from a festering debt mess before it engulfs financial institutions and lenders beyond its borders.

Britain's FTSE 100 rose 0.4 per cent to 5,897.93. Germany's DAX gained 0.8 per cent to 6,803.83 and France's CAC-40 added 0.6 per cent to 3,429.92.

Wall Street was set for a mixed opening, with Dow Jones industrial futures marginally higher at 12,849 but S&P 500 futures slipping slightly to 1,346.70.

Asian shares were muted by Chinese inflation data and a government report showing a decline in machinery orders in Japan.

Japan's Nikkei 225 index closed down 0.2 per cent to 9,002.24. South Korea's Kospi rose 0.5 per cent to 2,014.62. Hong Kong's Hang Seng slipped marginally to 20,010.01 and Australia's S&P ASX/200 shed 0.2 per cent at 4,282.90.

Investor sentiment in Asia hit a hurdle after China released data showing consumer prices had risen 4.5 per cent in January over a year earlier, up from the previous month's 4.1 per cent. Food prices jumped 10.5 per cent, driven by a 25 per cent gain in the cost of pork, the staple meat in China.

The People's Bank of China eased lending curbs in December to promote growth in the slowing economy. But the unexpected jump in the cost of living could make the central bank wary of carrying out further steps to loosen credit.

"They will not be relaxing monetary supply anytime soon," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "Actually that shows the economy, despite the various tightening measures, is still relatively strong."

On mainland China, the benchmark Shanghai Composite Index gained 0.1 per cent to 2,349.59. The Shenzhen Composite Index gained 0.6 per cent to 898.89.

"The market actually performed not too badly after the unexpectedly strong inflation data," said Guo Yanhong, an analyst at Huachuang Securities, based in Beijing.

Although the jump was mainly attributed to a seasonal increases in food costs due to the Lunar New Year holiday, the data underscore the pressure Beijing still faces to control living costs while also trying to boost slowing growth.

Property firms continued to gain following news earlier this week that the central bank has ordered banks to supply loans to first-time home buyers. Poly Real Estate, China's second largest listed property developer, gained 1.3 per cent while industry China Vanke gained 1.5 per cent.

Elsewhere, Japan's core machinery orders for December 2011 fell by 7.1 per cent on a seasonally adjusted basis, the Cabinet Office said. The figure, which excludes the volatile shipping and electric power industries, marked a downturn from a 14.8 per cent expansion in November.

Hitachi Construction Machinery lost 1.4 per cent, and construction machinery maker Komatsu shed 0.7 per cent.

Investors were monitoring the pace of negotiations in Europe aimed at preventing Greece from defaulting on its massive bond obligations. Talks in Athens among government leaders ended Thursday morning without definite results.

Still, Lun said there was confidence that a deal would be struck and that investors had become more relaxed, even about a negative outcome.

"I think a Greek default is a foregone conclusion. So if it happens, it won't shock anybody," he said.

Greece has been kept afloat for the last two years by €110 billion ($145 billion) in international rescue loans. But the money was not enough and a second loan is urgently needed to avert bankruptcy.

International lenders, however, have refused to approve more aid unless Greece learns to live within its means and implements a strict austerity program. Without an injection of emergency money — some €130 billion ($170 billion) is on the line — Greece will likely default on bond repayments due next month.

Benchmark oil for March delivery was up 29 cents to $99 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 30 cents to end at $98.71 per barrel on the Nymex on Wednesday.

In currency trading, the euro rose to $1.3297 from $1.3288 late Wednesday in New York. The dollar rose to 77.16 yen from 77.01 yen.