US, European stocks bounce back
Posted
US and European share prices have bounced back after huge losses a day earlier, with market sentiment buoyed by fresh official moves to stanch a credit crisis, stabilise shaky banks and protect savers.
Wall Street opened higher a day after Tuesday's global collapse, and after the US Federal Reserve opened a new front in a campaign to restore market confidence.
The US central bank said it would provide financial support to strapped companies by accepting "commercial paper," or short-term debt, to help them meet critical expenditures: in effect shoring up US businesses.
The European Central Bank announced plans to join other central banks in a scheme to boost the provision of dollars to cash-strapped commercial banks, a move aimed at inducing them to step up their lending.
In New York the Dow Jones Industrial Average rose 0.76 per cent to 10,031.64 in the first trades a day after slumping below 10,000 for the first time in four years.
The Nasdaq added 0.43 per cent to 1,870.98.
The latest effort by the Fed in an all-out war against the credit crunch creates a new "liquidity backstop" for corporate finance and was established after the US Treasury determined it was "necessary to prevent substantial disruptions to the financial markets and the economy," the central bank said.
Europe
The positive start to the trading day on Wall Street lifted spirits in Europe, where the London FTSE 100 index was up 2.67 per cent, the CAC 40 in Paris gained 1.95 per cent while the Frankfurt Dax added 1.51 per cent.
The European Union mobilised to protect depositor savings by more than doubling deposit guarantees to at least 50,000 euros, taking joint action against the global financial firestorm for the first time.
Desperate to restore confidence in the banking system, the European finance ministers also vowed to ride to the rescue of big banks whose collapse would otherwise threaten broader financial stability.
"We have agreed to assure the solidity and stability of our financial system and carry out any measure to reach that objective," said French Finance Minister Christine Lagarde, whose country holds the EU's rotating presidency.
"Europe is united in the face of the financial crisis and determined to act in a coordinated way," she said.
In the first concrete joint action to protect the general public against the financial crisis, the ministers agreed to increase minimum bank deposit guarantees to 50,000 euros ($67,500) from 20,000 euros currently.
In Asia on Tuesday, Tokyo fell by 3.0 per cent, while local markets jumped 1.7 per cent after the Reserve Bank sprang a surprise interest rate cut.
The London stock market was initially rocked Tuesday by reports that Royal Bank of Scotland (RBS), Barclays and Lloyds TSB had held a meeting with British finance minister Alistair Darling to discuss a possible capital injection.
RBS saw its share price plunge by almost 40 per cent early on, while the rest of the banking sector also took a big hit.
RBS and Barclays categorically denied they had sought capital from the government.
- AFP
