Portugal was forced to pay higher interest rates on Wednesday at a bond auction in another sign of increasing stress in the euro zone. The euro rose, however, along with European stocks. The Portuguese debt management agency said it sold €500 million, or $654 million, of 12-month Treasury bills at an average yield of 5.281 per cent — up from the 4.81 per cent for a similar auction in November, showing investors are asking for a higher return to take on a greater perceived risk. But demand for the securities was a healthy 2.5 times the amount offered. The credit-ratings agency Standard & Poor’s warned late Tuesday that it was putting Portuguese debt on a watch list for a possible downgrade. An S&P analyst, Frank Gill, said the move “reflects our view of increased risks to the government’s credit-worthiness.” Market watchers have been fixated for much of this year on the rising borrowing costs of so-called “peripheral” euro-zone members, including Greece, Ireland, Portugal and Spain, that are having trouble righting their public finances after the financial crisis wrecked asset values and economic growth stagnated. The spreads, or difference in interest-rates of those countries’ bonds over their German equivalents — considered the safest in Europe — has in many cases reached the highest levels since the creation of the euro in 1999. An €85 billion rescue Sunday of Ireland by the International Monetary Fund and European Union, following a rescue last spring for Greece, has so far done little to stop fears that the contagion will spread. On Monday and Tuesday, ominously, Italian and Belgian bonds also began to show signs of strain. In early afternoon trading, just after the Portuguese auction, Italian, Spanish, Irish, Belgian and Portuguese 10-year bonds were all showing gains after a poor showing Tuesday. The Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 1.4 per cent, while the FTSE 100 index in London added 1.2 per cent. The CAC 40 in Paris rose 0.7 per cent, and the DAX in Frankfurt rose 1.5 per cent. Trading in U.S. index futures suggested Wall Street stocks would open with a strong bounce into positive territory. The Dow Jones industrial average closed 0.4 per cent lower Tuesday, while the Standard & Poor’s 500 index fell 0.6 per cent. The dollar was mixed against other major currencies. The euro rose to $1.3098 from $1.2983 late Tuesday in New York, and the British pound rose to $1.5626 from $1.5562. But the dollar ticked up against the Japanese currency, rising to 83.79 yen from 83.69 yen, and rose to 1.0047 Swiss francs from 1.0035 francs. Asian shares were mostly higher. The Tokyo benchmark Nikkei 225 stock average closed with a gain of 0.5 per cent, while the main Sydney market index, the S&P/ASX 200, was up just under 0.1 per cent. In Hong Kong, the Hang Seng index rose 1.1 per cent and and in Shanghai the composite index rose 0.1 per cent. US crude oil futures for January delivery rose $1.30 to $85.40 a barrel. Comex gold rose $6.80 to $1,392.90 an ounce.

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