European Markets Rise On Hopes Of France Budget Cuts

European markets rose Friday as investors were hopeful that France would follow Spain to announce budget cuts to reduce deficit and help control the debt pressure faced by the euro zone.

The French CAC 40 index was up 0.24 percent or 8.22 points to 3447.54. Shares of Cap Gemini SA gained 2.22 percent and those of Renault SA advanced 1.16 percent.

London’s FTSE 100 index was up 0.38 percent or 22.03 points to 5801.45. Shares of Evraz PLC rose 1.88 percent and shares of Rio Tinto PLC gained 1.63 percent.

The German DAX 30 index gained 0.57 percent or 41.32 points to 7331.34. Shares of Deutsche Bank AG rose 1.30 percent and those of Commerzbank AG advanced 1.07 percent.

Spain's IBEX 35 was up 1.19 percent or 93.30 points to 7935.60. Shares of Acciona SA rose 2.64 percent and those of Abengoa SA advanced 1.99 percent.

In France, the 2013 budget will be presented in the council of ministers Friday. It is expected to contain a series of deficit reduction measures, including additional tax increases amounting to 20 billion euros distributed evenly between households and businesses.

In its budget for 2013 presented Thursday, the Spanish government announced cuts on spending which are expected to slim down the deficit faced by the country. The deficit is hoped to be reduced by 0.77 percent of gross domestic product in 2013.

Investors are expected to focus on the results of the independent bottom-up Spanish bank stress tests expected to be unveiled Friday. “Recent press reports suggest that the actual capital needs by banks could end up well below the total 100 billion euros ($125 billion) official credit line available, potentially around 60 billion euros. The disbursement of the financial aid will likely help easing deposit outflows, which, although moderating, remained significant in August, and the funding pressure in the Spanish banking sector,” Credit Agricole said in a note.

Market participants expect Spain to ask for a bailout under the enhanced conditions credit line, which will trigger the bond purchasing operation by the ECB.