February 27, 2024

Stock Rally Continues on Wall Street

European officials said Monday that they were working on a plan to increase the borrowing power of the European Financial Stability Facility, the euro zone bailout fund, in a response to fears that it could be swamped by the crisis.

While noting there is “nothing concrete so far,” Jeremy Gaudichon, a fund manager at K.B.L. Richelieu, said, “There is hope that we’ll have European collaboration to help solve the crisis.”

After a 2.5 percent gain on Monday, the Dow Jones industrial average was up an additional 2.4 percent early Tuesday, adding 262.17 points to 11,306.03. The broader Standard Poor’s 500-stock index gained 2.3 percent in early trading and the Nasdaq composite index rose 2 percent.

In late afternoon trading in Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was up 4.2 percent, while the FTSE 100 index in London was up 3.1 percent and the DAX in Frankfurt rose 4.6 percent. Financial shares were leading the charge, with BNP Paribas gaining 10 percent, Société Générale gaining 8.8 percent and Deutsche Bank adding 10.3 percent.

Speaking to German business leaders in Berlin on Monday, George Papandreou, the Greek prime minister, said financial markets were looking for “stronger political leadership to restore confidence.”

The crisis “offers a unique chance to bring in important reforms,” he added, expressing optimism that Greece could overcome its difficulties. “We are not a poor country, we’re a country that has been governed badly,” he said.

Speaking at the same conference, the German chancellor, Angela Merkel, said Germany would provide all the help it could to stabilize Greece.

Markets have also been lifted by the Federal Reserve’s Operation Twist, announced last week, under which the central bank is buying longer-dated Treasuries while selling shorter-maturity securities to drive down long-term borrowing costs. The Fed will also reinvest maturing mortgage debt it holds into mortgage-backed securities in an effort to restart the feeble American housing market.

“Valuations of banks and cyclical stocks had gotten very depressed by last Friday, so it seemed like a good time to invest,” Mr. Gaudichon said. “But on the political side, it is still very uncertain.”

Among European leaders, he said, it is clear that there is a consensus that action needs to be taken to save the euro zone.

“The will is there, but the implementation is going to be very difficult,” Mr. Gaudichon said, especially considering that France and other countries are headed toward elections and taxpayers are becoming increasingly uneasy about extending further aid to Greece.

Asian shares surged across the board. The Kospi index in South Korea broke a three-day losing streak, gaining 5 percent. The Nikkei 225 stock average in Tokyo rose 2.8 percent. In Sydney, the Standard Poor’s/ASX 200 index gained 3.6 percent. In Hong Kong, the Hang Seng index closed up 4.2 percent and in Shanghai the composite index added 0.9 percent.

Prices for government bonds considered the most stable assets fell as investors sought more risk, with the yield on the benchmark U.S. 10-year Treasury at 1.98 percent, up eight basis points.

American crude oil futures for November delivery rose 3.1 percent a barrel, to $82.75. Comex gold was up 3.9 percent to $1,653.80 an ounce.

The dollar was mixed against other major currencies. The euro was at $1.3582, up from $1.3533 late Monday in New York, while the British pound rose to $1.5618 from $1.5565. The dollar rose to 76.41 yen from 76.36 yen, but fell to 0.9001 Swiss francs from 0.9015 francs.

David Jolly reported from Paris. Sei Chong contributed reporting from Hong Kong.

Article source: http://feeds.nytimes.com/click.phdo?i=bd62772a11b062080fbc6b08416eec84

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