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European stocks, euro rise in wait for EU budget deal

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(Globalpost/GlobalPost)

European stock markets rose and the euro gained against the dollar on Friday as EU leaders looked set to approve an austerity budget for its 27 member countries.

London's FTSE 100 index of top companies increased 0.54 percent to 6,262.07 points in late morning deals. Frankfurt's DAX grew 0.35 percent to 7,617.64 points and in Paris the CAC 40 gained 0.68 percent to 3,625.57.

In foreign exchange trading, the European single currency advanced to $1.3420 from $1.3395 late in New York on Thursday.

Gold prices edged up to $1,670.25 an ounce from $1,668 Thursday on the London Bullion Market.

"European markets are trying to close the week out on a positive note, but with closing statements from the EU economic summit still to come there is still ample opportunity for a reversal of sentiment," said Alastair McCaig, market analyst at IG trading group.

EU leaders appeared poised on Friday to cut the EU budget for the first time in its six-decade history, with a tentative agreement to trim spending by three percent over the rest of the decade, diplomats said.

After a short break following a 19-hour session lasting through the night, the bloc's 27 leaders were due to return to the negotiating table at 1200 GMT.

At the marathon talks to produce a 2014-2020 budget, British Prime Minister David Cameron, apparently backed by German Chancellor Angela Merkel, led a sustained push for the EU to share in the austerity national governments are facing.

France, along with Italy, fought to protect spending it sees as essential to boost growth and jobs at a time of record unemployment, but indications early Friday were that Paris could live with the deal.

A draft deal sets the 2014-20 actual spending or "payments" at 908.4 billion euros ($1.2 trillion), with an absolute ceiling of 960 billion euros for spending "commitments" to the budget.

The latest figures would represent a 3.0 percent cut from the 2007-13 budget and were less than the 973 billion euros that Cameron and allies such as the Netherlands rejected at a budget summit in November that collapsed without any deal.

In Asia data showing China's trade surplus had risen more than expected provided extra buying support, adding to a recent trend of improvement in the the world's number two economy.

The trade surplus rose 7.7 percent year-on-year to $29.2 billion for the month, the General Administration of Customs said in a statement, beating a median $26.6 billion forecast of economists in a Dow Jones Newswires survey.

At the same time inflation slowed to 2.0 percent in January, the National Bureau of Statistics said, easing from a seven-month peak of 2.5 percent in December.

Asian stock markets mostly rose on Friday following the Chinese figures and after a sell-off in the previous session, but Tokyo was hit by a stronger yen and data showing Japan suffered its lowest current account surplus in nearly 30 years.

Back in Europe, shares in PSA Peugeot Citroen see-sawed on talk of further state support for the embattled French auto group after it announced a massive writedown of 4.7 billion euros ($6.3 billion) for 2012.

At the opening of trading, shares in the carmaker plunged by nearly 5.0 percent on Thursday's announcement of the charge to reflect that the crisis in the European car market is likely to last longer than previously thought.

But but within forty minutes the share price had rebounded to show a net gain of nearly 4.0 percent after a minister said it was possible for the state to take a stake in the company.

The shares then plunged back into the red after the finance ministry poured cold water on that possibility.

In midday deals, PSA Peugeot Citroen shares were showing a gain of 0.72 percent to 5.92 euros.

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http://www.globalpost.com/dispatch/news/afp/130208/european-stocks-euro-rise-wait-eu-budget-deal