February 28, 2024

Move by Central Banks Lifts Wall Street for 2nd Day

Wall Street rose Friday, continuing a rally that lifted markets the previous day, when investors took comfort from efforts by the world’s leading central banks to bolster liquidity in the European banking system.

The European Central Bank and its counterparts in the United States, Britain, Japan and Switzerland opened new lines of credit to European banks, allowing them to borrow dollars for as long as three months, a period that gives them breathing space for the rest of this year.

Analysts cautioned that the step, while providing welcome relief to a range of beleaguered financial institutions, was no panacea for the underlying problem: the crippling debt levels that are weighing on several euro zone countries and threatening to push the hardest-hit among them, Greece, into default.

“It’s an important and gratifying but small step in the right direction,” Andrew Pease, chief investment strategist for Asia Pacific at Russell Investments, said in a conference call Friday.

But he added that, ultimately, more concerted moves were needed toward a more fiscally united Europe.

“Things will likely need to get worse,” he said, before the necessary decisions to “clear the air” would be taken.

Still, investors around the world appeared to greet the announcement with a renewed interest in purchasing stocks.

By early afternoon, the Standard Poor’s 500-stock index was up 6.65 points, or 0.6 percent, to 1,215,76. The Dow Jones industrial average gained 86.66 points, or 0.8 percent, to 11,519.84, and the Nasdaq composite added 14.20 points, or 0.5 percent, to 2,621.27.

In Europe, the Euro Stoxx index of 50 blue chip companies rose 0.2 percent. In Germany, the DAX climbed 1.2 percent, and the CAC 40 in France fell 0.5 percent.

In Japan, the Nikkei 225 index closed 2.3 percent higher. The Kospi in South Korea climbed 3.7 percent, and the benchmark index in Australia finished up 1.9 percent.

In India, where the central bank nudged interest rates up again Friday in a battle against inflation, the Sensex closed 0.3 percent higher. The Hang Seng index rose 1.4 percent in Hong Kong.

The euro was trading at about $1.3796, down about 0.6 percent against the dollar.

The yield on the benchmark 10-year Treasury note fell to 2.071 percent.

Meanwhile, a meeting of European finance ministers and other policy makers in the Polish city of Wroclaw on Friday and Saturday fanned expectations of more determined action to contain the growing sovereign debt crisis.

The United States treasury secretary, Timothy F. Geithner, was also attending, a sign of the sense of urgency surrounding the euro zone debt crisis, analysts said.

A meeting of the Federal Reserve of the United States next week will also be closely watched, amid expectations that the central bank may signal new measures for the lumbering American economy.

“The Fed is under pressure to come up with some sort of additional stimulus. It is also under pressure not to do so,” analysts at the financial services group DBS wrote in a research note published Friday, highlighting the complex pressures facing the American central bank and the internal debate about how best to act. “Still, we expect the Fed will do something, mainly because that’s the Fed’s job. You can’t just say ‘we’re out of ideas’ and walk away.”

Jack Ewing contributed reporting from Frankfurt.

Article source: http://www.nytimes.com/2011/09/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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