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Stocks Rebound as Eurozone Fears Ease

The Hong Kong Hang Seng index closed lower by 1.4% and the Nikkei in Japan closed down 0.29%.

The FTSE in London settled down by 0.95% and the DAX in Germany finished lower by 1.26% as business confidence in the biggest eurozone economy fell to its lowest point in more than two years.

European leaders also met in Rome Friday to discuss a unanimous plan on bringing relief to the eurozone debt crisis, but concluded with little consensus on the topic of eurobonds ahead of the big European summit next Thursday and Friday. However, Germany, France, Italy and Spain did agree that there should be a European growth package worth about 1% of the European Union's gross domestic product or €130 billion.

In Spain, independent audits indicate that the country's banks will, under duress, require up to €62 billion in financial support, below the earlier foreseen €100 billion in eurozone bailouts.

Friday's U.S. economic calendar was empty but Fed officials picked up the slack by weighing in on future monetary policy.

St. Louis Fed Bank President James Bullard told Bloomberg TV Friday that there are still high hurdles to a third round of quantitative easing in the U.S. as it would require the Fed to take on a lot more risk on its balance sheet.

Federal Reserve Bank of Richmond President Jeffrey Lacker, who dissented against the extension of Operation Twist, meanwhile reiterated that he does not that think further monetary stimulus would make a substantial difference for economic growth and employment in the U.S. without raising inflation to undesirable levels.

"With some of the big events finally out of the way (Greece vote, G20, Fed) we are getting into the dog days of summer," said Ryan Detrick, senior technical strategist at Schaeffer's. "Earnings seasons doesn't heat up for a few more weeks, so going forward expect low volume and more volatility as we continue to hinge on the continued issues out of Europe."

"All in all, we continue to think the market is in the process of making a bottom.," Detrick said. "Remember, it took nearly eight weeks last year before the ultimate bottom formed. We think we are carving out another bottom currently."

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