March 24, 2023

Gas and Oil Futures Rise as Investors Take Cover

Gasoline and heating oil futures gained on Monday while United States Treasuries also rose, as economic worries over Hurricane Sandy fueled safe-haven buying in thin trading as the powerful storm began to batter the East Coast.

The storm forced Wall Street to close on the anniversary of the 1929 stock market crash. It was the stock market’s first weather-related closure in 27 years, and other markets closed early as investors braced for the impact of the hurricane, one of the biggest storms ever to slam the Eastern Seaboard.

In Europe, stocks, led by insurers, fell on expectations that damage related to the storm would increase claims, while political jitters in debt-laden Italy cast shadows on the euro zone. The reinsurers Swiss Re and Hannover RE led a weaker European insurance sector index.

“We are seeing insurers slide and we’ve sold a bit of Aviva and RSA,” said Ed Woolfitt, head of trading at Galvan Research.

The blue-chip Euro Stoxx 50 index fell 0.7 percent, to 2,478.84, after Silvio Berlusconi, the former prime minister of Italy, threatened to bring down the government of his successor, Mario Monti, which has appeased markets with its austerity agenda.

In London, the FTSE 100 fell 0.2 percent, to 5,795.10. The DAX index in Germany fell 0.4 percent, to 7,203.16, and the CAC 40 in Paris slipped 0.8 percent, to 3,408.89.

The euro fell against the dollar and yen, hurt by uncertainty over whether Greece could agree to a deal on austerity and with no sign of when Spain might request aid. The euro was expected to remain subdued against the dollar and the yen, with investors preferring safe-haven currencies, with weak earnings from top companies in the region weighing on investors.

The euro was down 0.3 percent at $1.290, not far from a two-week low of $1.2881.

The dollar rose to a session high against the yen ahead of a Bank of Japan policy review on Tuesday at which the central bank is expected to further ease monetary policy.

With the storm bearing down on the East Coast, trading was thin in United States foreign exchange, fixed-income, precious metals and energy markets as public transportation was shut in New York and parts of Lower Manhattan were evacuated.

“You have uncertainties now. You have these safe-haven purchases. People are trying to figure out the economic impact from the storm,” said Larry Milstein, head of government and agency trading at R. W. Pressprich Company in New York.

“Right now it’s the easy way to buy Treasuries and wait to see what happens,” Mr. Milstein said.

The benchmark United States 10-year Treasury note traded 8/32 higher in price to yield 1.72 percent.

United States heating oil futures gained, touching the highest level relative to crude oil on record, as dealers hedged against the risk of power failures and flooding from the hurricane that could damage refineries and keep production shut for weeks.

The crack spread, the difference in value between a barrel of heating oil and a barrel of crude oil, touched $45.15 a barrel.

“Markets will be watching for reports of damage to energy infrastructure, notably refineries, post-Sandy, given the state of extremely low gas oil inventories as we move into winter season,” Deutsche Bank analysts said.

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Global Stocks Rally on Positive Economic News

PARIS — Stocks rose Tuesday in Europe and Asia after strong economic data from China and Germany, and Wall Street appeared headed for a strong opening as investors awaited a slew of important bank earnings.

The Chinese economy, which has been an engine of growth since the financial crisis arrived in 2008, grew at an annual rate of 8.9 percent in the last three months of 2011, down from the 9.1 percent in the third quarter of 2011, but better than many economists had expected.

In Mannheim, the Center for European Economic Research, known by its German initials Z.E.W., reported that its economic sentiment index
increased by 32.2 points in January from last month, reaching a level of minus 21.6 points, its highest point since last July.

It was the largest monthly gain ever for the index, Reuters reported.

“Contrary to repeatedly expressed fears of a recession, the assessment of the financial market experts gives reason for cautious optimism that Germany will only experience a dent in economic activity,” the Z.E.W. president, Wolfgang Franz, said in a statement. He also noted that the European Central Bank’s massive supply of funding to the banking sector last month could have contributed to the uptick.

The institute’s economic expectations index for the euro zone also gained, rising 21.6 points to stand at minus 32.5 points.

Citigroup and Wells Fargo were to announce their earnings later Tuesday, while Goldman Sachs reports on Wednesday and Bank of America on Thursday.

By midday, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was up nearly 2 percent, while the FTSE 100 index in London was up 1.1 percent.

Standard Poor’s 500 index futures rose, suggesting major indexes would bounce higher when New York trading gets under way. U.S. markets were closed Monday for the Martin Luther King holiday.

A successful debt sale in Spain helped European stocks to rally for a second day.

In its first test of the market’s appetite for debt since it was downgraded by S.P. last Friday, Spain on Tuesday sold €4.9 billion, or $6.2 billion, in Treasury bills. It sold 12-month bills priced to yield 2.05 percent, down from 4.05 percent at the previous auction of such securities, in December, and 18-month bills at 2.35 percent, down from 4.23 percent.

The market’s new enthusiasm for riskier assets was reflected in European sovereign bond yields. French 10-year bonds rose in price, despite the Standard Poor’s downgrade Friday that clipped the country’s rating by one notch from the top AAA spot. The yield, which moves in the opposite direction of the price, fell 4 basis points to 2.98 percent.

Italian 10-years fell 14 basis points in yield, to 6.45 percent, while Spain’s 10-years yielded 5.03 percent, down 9 basis points. A basis point is equal to one-hundredth of a percent.

Analysts caution against reading too much into yields and auction results, however, as the European Central Bank has been intermittently intervening in the secondary market since August to help Spain and Italy. And they note that the fear factor in the interbank market remains at extremely elevated levels: European banks deposited a record €501.9 billion overnight Monday at the E.C.B., the central bank said Tuesday.

U.S. crude oil futures rose 2.0 percent to $100.64 a barrel. Comex gold futures rose 1.9 percent to $1,662.40 an ounce.

The dollar was mixed against other major currencies. The euro rose to $1.2788 from $1.2667 late Monday, while the British pound rose to $1.5385 from $1.5325. The dollar fell to 76.60 yen from 76.78 yen, and to 0.9459 Swiss francs from 0.9542 francs.

Asian shares posted solid gains. The Tokyo benchmark Nikkei 225 stock average added 1.1 percent. The Sydney market index S.P./ASX 200 rose 1.7 percent. In Hong Kong, the Hang Seng index added 3.2 percent and in Shanghai the composite index rose 4.2 percent.

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Markets End Lower Ahead of European Summit

Stocks fell sharply on Wall Street on Thursday after the European Central Bank appeared to dampen expectations for an expanded bond-buying program and as leaders gathered for a summmit meeting in Brussels aimed at resolving the sovereign debt crisis in Europe.

The E.C.B cut its benchmark interest rate for the second month in a row and expanded the emergency funding it provides to cash-starved banks.

But Mario Draghi, president of the central bank, indicated in a news conference that he was cautious about future bond purchases. Yields on Italian and Spanish bonds rose sharply after his remarks and stocks declined in Europe and then on Wall Street.

Analysts said that investors appeared to be disappointed by M. Draghi’s remarks, in which he said he was “surprised” his recent comments were seen as a sign that the E.C.B. would buy more bonds if political leaders delivered tougher rules on budgetary discipline.

Anthony Valeri, an investment strategist in fixed income at LPL Financial, said that Mr. Draghi was “keeping his powder dry for when he really needs it.”

“It puts more pressure on the summit to deliver something tangible,” said Mr. Valeri.

While markets traded lower for most of the day, the decline accelerated at the end of the session. At 4 p.m., the Dow Jones industrial average was down 1.6 percent after a 0.4 percent rise on Wednesday. The Standard Poor’s 500-stock index slipped 2.1 percent, and the Nasdaq composite index was down 2 percent. Financial stocks fell the most, down nearly 4 percent.

European stocks closed even lower, with the Euro Stoxx 50 down 2.4 percent.

At their two-day summit meeting, European leaders are expected to consider proposals for tougher fiscal rules from the German chancellor, Angela Merkel, and President Nicolas Sarkozy of France. The leaders were gathered for a dinner on Thursday before the main part of their agenda on Friday.

José Manuel Barroso, the president of the European Commission, sought to instill confidence that a solution would be found, saying early Thursday: “I believe this is possible,” according to The Associated Press.

“My appeal — my strong appeal — to all the heads of state and government is to show this commitment to our common currency,” Mr. Barroso said. “I think this is indispensable, and leadership is about making possible what is indispensable.”

Mr. Barroso was in Marseille along with Mr. Sarkozy and Mrs. Merkel for a meeting of the European People’s Party, the conservative bloc in the European Parliament, before their departure for Brussels.

Laura LaRosa, the director of fixed income for Glenmede, said that United States Treasury prices rebounded as investors’ appetite returned for assets seen as safer. On 10-year Treasuries, the yield, which moves opposite to the price, was at 1.969percent, down 6 basis points.

“I think what you are going to see tomorrow is going to be another day where there is a tremendous amount of anticipation,” she said.

Tim Courtney, chief investment officer of Burns Advisory Group, said that with the euro zone debt crisis a concern for investors for some time, expectations for a solution were already low and priced in to the markets.

Late Wednesday, Standard Poor’s said that it was putting the credit ratings of the entire 27-nation European Union on watch for a possible cut from its top AAA rating, citing “concerns about the potential impact on these member states of what we view as deepening political, financial, and monetary problems within the euro zone.”

The action, of mainly technical interest since the bloc itself does not issue debt on a large scale, came after the agency on Monday put 15 of the 17 euro member nations on watch for downgrade, meaning all of the euro zone countries face ratings cuts — and potentially higher borrowing costs — if the crisis meetings fail.

“A bit of pressure is not unwelcome,” Jean-Claude Juncker, the Luxembourg prime minister who acts as head of the Eurogroup, said on French radio regarding the S.P. action, according to Reuters. Still, he said, “the pressure would have existed even if there hadn’t been these warnings from the agencies.”

In its second monetary easing in just five weeks, the European Central Bank cut its main overnight rate by a quarter of a percentage point, to 1 percent. The Bank of England’s Monetary Policy Committee, which also met Thursday, left the main British overnight rate unchanged at 0.5 percent.

Stocks in Europe closed lower across the board. The FTSE 100 index in London lost 1.1 percent, the CAC 40 index in Paris was down 2.5 percent and the DAX in Frankfurt was 2 percent lower.

The euro rose after the central bank lowered its interest rate, but then slumped. It was trading at $1.3363 from $1.3412 late Wednesday in New York.

Yields on Italian and Spanish bonds rose sharply after Mr. Draghi’s remarks. At the end of the session, the yield on 10-year Italian bonds climbed 47 basis points to 6.429 percent, and the Spanish yields advanced 39 basis points to 5.75 percent.

German 10-year bonds yields were 2.01 percent, down 9 basis points. A basis point is one-hundredth of a percent.

Asian shares declined. The Tokyo benchmark Nikkei 225 stock average fell 0.7 percent. The Sydney market index S.P./ASX 200 fell 0.3 percent. InHong Kong, the Hang Seng index fell 0.7 percent and in Shanghai the composite index fell 0.1 percent.

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Stocks and Bonds: Euro Troubles and Report on Slowing U.S. Economy Drag Down Shares

Stocks fell sharply in morning trading but rebounded after the International Monetary Fund said it would extend new short-term lines of credit to developed countries.

Traders were also reacting to a Spanish debt auction that sharply raised the country’s borrowing costs.

“It doesn’t look like the euro zone problems are going away and now we’ve had confirmation that the U.S. economy is slowing,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. “I think this makes for a very difficult market.”

The Commerce Department in Washington said Tuesday that the nation’s gross domestic product grew at a 2 percent annual rate in the third quarter, down from the 2.5 percent it had said previously.

Then, at midday, the I.M.F. said it had introduced a six-month liquidity line, throwing help to countries at risk from the euro zone crisis, and the Standard Poor’s 500-stock index reversed earlier losses.

The index ended the day down just 4.94 points, or 0.41 percent, to 1,188.04; on Monday, it lost 1.86 percent. The Dow Jones industrial average lost 53.59 points, or 0.46 percent, to 11,493.72. The Nasdaq composite index fell 1.86 points, or 0.07 percent. to 2,521.28.

In Europe, the Euro Stoxx 50 index closed off 1.09 percent, while the FTSE 100 index in London declined 0.3 percent.

Unless the European Central Bank has a change of heart and begins a major round of quantitative easing, or buying government bonds in large quantities to increase the money supply, Mr. Gijsels said he saw little reason for optimism.

Euro zone bonds reflected continuing stress. Spain’s 10-year bonds were at 6.55 percent, up 8 basis points, while Italy’s 10-year bonds were up to 6.79 percent. French 10-year bonds were at 3.55 percent, up 10 basis points. Germany’s 10-year notes were flat at 1.91 percent.

In the United States, the Treasury’s benchmark 10-year Treasury note rose 13/32, to 100 23/32, and its yield fell to 1.92 percent from 1.97 percent late Monday. The new Spanish government of Prime Minister Mariano Rajoy, which takes office next month, found Tuesday that there would be no market honeymoon after Spain had to pay more to sell short-term debt.

Mr. Rajoy’s Popular Party won a resounding 186 seats and a governing majority on Sunday in Spain’s 350-seat lower house of Parliament. It promised to turn around an economy whose jobless rate is over 20 percent.

But the Spanish Treasury on Tuesday sold three-month bills priced to yield 5.11 percent — more than double the 2.29 percent it paid to sell similar securities on Oct. 25. It also sold six-month debt at 5.23 percent, up from 3.30 percent in October.

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Banks Seek Emergency Funds From E.C.B.

Lenders took out €247 billion, or $333 billion, in one-week loans, the E.C.B. said, the biggest amount since April 2009. When banks borrow from the E.C.B., it is usually a sign that they cannot get credit on the open market at reasonable rates.

The sovereign debt crisis has undermined the flow of funds to banks in the euro area by raising doubts about the solvency of institutions with a large exposure to European government debt. In particular, U.S. money market funds have severely cut back lending to European banks in recent months, leading many institutions to turn to the E.C.B.

Compounding the problem, many euro area banks have also had trouble selling bonds as a way to raise money that they can lend to customers, raising the specter of a credit crunch that could amplify an impending economic slowdown. In addition, some banks may fail if they are unable to raise short-term cash.

On Tuesday, the Spanish treasury sold three-month bills priced to yield 5.11 percent, more than double the 2.29 percent yield at a sale of similar securities on Oct. 25. It also sold six-month debt at 5.23 percent, up from 3.30 percent in October.

Euro zone bonds reflected continuing stress. Spain’s 10-year bonds were at 6.57 percent, up 6 basis points, while Italy’s 10-year bonds were up 16 basis points at 6.81 percent. French 10-year bonds were at 3.5 percent, up 6 basis points. A basis point is one-hundredth of a percent.

Wall Street stocks traded weakly and European markets gave up early gains after Spanish debt commanded sharply higher yields and revised data showed that the United States grew less than first thought in the third quarter.

The Euro Stoxx 50, a barometer of European blue chip stocks, lost 1 percent on Monday, while the FTSE 100 pulled back 0.3 percent.

The E.C.B. said that 178 banks asked for loans Tuesday. That compares with the 161 banks that borrowed €230 billion last week. Since 2008 the central bank has been allowing lenders to borrow as much as they want at the benchmark interest rate, which at present is 1.25 percent. Banks must provide collateral, and the E.C.B. is not supposed to prop up banks that are insolvent, only those that have a temporary liquidity problem.

At the same time, the E.C.B. continued to resist calls that it stretch its mandate and expand the money supply, as the U.S. Federal Reserve and Bank of England have done. The E.C.B. has been buying bonds from countries like Spain and Italy to try to hold down their borrowing costs, but the amount — €195 billion so far — is modest compared with the “quantitative easing” employed by other central banks.

A growing number of commentators say the E.C.B. should be able to buy government bonds to stimulate the economy. “It is essential to have a central bank free to use all the levers, including variants of quantitative easing,” Adair Turner, chairman of the British Financial Services Authority, told an audience in Frankfurt late Monday that included Vítor Constâncio, vice president of the E.C.B.

Richard Koo, chief economist at the Nomura Research Institute, wrote in a note Tuesday that “the E.C.B. should embark on a quantitative easing program similar in scale to those undertaken by Japan, the U.S. and the U.K.”

“Doubling the current supply of liquidity would not trigger inflation and would enable the E.C.B. to buy that much more euro zone government debt,” Mr. Koo said.

But there has been no sign the E.C.B. will budge from its position that it is barred from financing governments, and that purchases of government bonds are justified only as a way of maintaining control over interest rates and fulfilling the bank’s main task of keeping prices stable.

“By assuming the role of lender of last resort for highly indebted member states, the bank would overextend its mandate and shed doubt on the legitimacy of its independence,” Jens Weidmann, president of the German Bundesbank and a member of the E.C.B.’s governing council, said Tuesday in Berlin.

“To follow this path would be like drinking seawater to quench a thirst,” he said.

Lucas D. Papademos, the new prime minister of Greece and a former vice president of the E.C.B., met with Mario Draghi, the E.C.B. president, when he visited the bank Monday. The bank did not disclose details of their discussions, but Greece’s fate is to a large extent in the E.C.B.’s hands. Because of its bond purchases, the E.C.B. is the Greek government’s largest creditor, and the E.C.B. is one of the institutions that determines whether Greece will continue to receive E.U. aid.

Meanwhile, U.S. money market funds continue to pull cash out of Europe and especially out of France, according to data published Tuesday by Fitch Ratings. The ratings agency said U.S. prime money market funds had reduced their total exposure to European banks by 14 percent from their exposure at the end of August, and by 37 percent since the end of May. U.S. funds have cut their exposure to French banks by 42 percent since the end of August, Fitch said.

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Shares Rise After European Interest Rate Cut

Equity markets in Europe accelerated their gains and Wall Street opened up on the move by the E.C.B., which came after the Organization for Economic Cooperation and Development earlier this week added its voice to the chorus calling for lower borrowing costs to stimulate growth. Bond prices fell.

Hours later, amid continued uncertainty over his political future, Prime Minister George Papandreou of Greece called off his plan to hold a popular vote on Greece’s new loan deal with foreign creditors. The referendum was seen as a risky move that could have had serious repercussions for the entire euro zone.

Mr. Papandreou reversed course after meeting with his French and German counterparts in the south of France, where President Obama and other leaders from the Group of 20 nations were holding a summit meeting focused on the European sovereign debt crisis.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 2.5 percent, with Germany’s DAX up 2.8 percent and the CAC 40 in Paris up 2.7 percent. The FTSE 100 index in London rose 1.1 percent.

At 4 p.m., the Standard Poor’s 500 index was up 1.9 percent, the Dow Jones industrial average gained 1.8 percent, and the Nasdaq rose 2.2 percent.

Treasury prices fell. The United States Treasury’s benchmark 10-year note was up to 2.063 percent in yield from 1.99 percent on Wednesday.

Investors are closely watching some of the more highly indebted countries with struggling economies in Europe.

The Italian bond yield rose to a high of 6.353 percent on Thursday before pedaling back to 6.167. Spanish bond yields were 5.463 percent, slightly higher than on Wednesday.

“It is obvious that the E.C.B. has caught the crisis virus and is trying everything it can to prevent a full-fledged recession,” Carsten Brzeski, an economist with ING in Brussels, wrote in a report.

The question now, he added, “is whether the E.C.B. is also willing to do everything to prevent a further escalation of the sovereign debt crisis, becoming the unconditional lender of last resort of the euro zone.”

The sovereign debt troubles have overshadowed global markets for more than a year. Most recently, equities markets have bounced around since an agreement reached in Europe last month, staging a strong rally before falling back as uncertainty grew about the details of the plan.

While the latest developments in Greece were seen as supportive for stocks, “the big thing was the European rate cut and that is what is driving the market,” said Doug Cote, chief strategist at ING Investment Management. “Investors are going to start nibbling around and going back to risk.”

The E.C.B had raised its benchmark interest rate twice this year, to 1.5 percent from 1 percent. On Thursday, the bank cut it to 1.25 percent.

Stanley Nabi, the chief strategist at Silvercrest Asset Management Group, said the E.C.B. had made a mistake when it raised rates, and was now correcting it in the context of a rapidly deteriorating situation in Greece and economic troubles in Europe.

“To an increasing degree every one of the countries in the euro zone is now experiencing a sluggish economy or is on the precipice of a recession,” he said. “I think what they are trying to do is just in case Greece pulls out of the euro zone or is thrown out, they want to build a moat around the other countries so that it won’t have a very deep impact on the global economy and European economies.”

Asian shares closed mostly lower. The Sydney market index S.P./ASX 200 fell 0.3 percent. In Hong Kong, the Hang Seng index fell 2.5 percent. Shanghai bucked the trend, with the composite index rising 0.2 percent. Tokyo markets were closed for a national holiday.

Officials meeting in Cannes were grappling with the growing possibility that Greece will leave the euro zone, leaving a trail of scorched lenders in its wake and possibly shifting the focus of market turmoil to bigger countries like Italy and Spain. But even as they address those questions, the disarray in Europe threatens to weigh more broadly on the global economy.

On Wednesday, the Federal Reserve offered a sobering outlook for growth in the United States, predicting the economy would expand 2.5 percent to 2.9 percent in 2012, down from its prior forecast of 3.3 percent to 3.7 percent. It said the unemployment rate would probably remain at 8.5 percent or above through the end of next year.

The euro was at $1.3845 from $1.3747 late Wednesday in New York.

David Jolly reported from Paris. Jack Ewing contributed reporting from Frankfurt, and Rachel Donadio and Niki Kitsantonis contributed reporting from Athens.

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European Markets Rebound but Remain on Edge

Greek news outlets reported early Wednesday that Prime Minister George Papandreou had won unanimous support from his cabinet for his proposed referendum. However, several lawmakers in the governing Socialist Party rejected his plan, raising the possibility that he will not survive a no-confidence vote Friday.

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France were planning emergency talks on Greece later Wednesday with euro-zone leaders in Cannes, on the eve of the Group of 20 nations summit meeting.

In early trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 1.3 percent, while the FTSE 100 index in London gained 0.7 percent. On Tuesday, global markets tumbled after Mr. Papandreou made his surprise referendum announcement.

Industrial and banking shares led European indexes higher, with the mining giants Rio Tinto and BHP Billiton both up more than 2 percent. The French bank BNP Paribas rose 5.3 percent, and HSBC Holdings, the largest British lender, gained 1.3 percent.

Trading in Standard Poor’s 500 index futures suggested Wall Street would open the day on a positive note. The S. P. 500 fell 2.8 percent Tuesday.

“Markets are seriously pondering a disorderly default in Greece and risk assets are tanking,” said analysts at Crédit Agricole CIB in a note to clients. “There is little prospect of any turnaround today unless officials can pull a rabbit out of the hat today, but even the rabbit is likely to remain elusive.”

The analysts also said that investor sentiment was also hurt by weaker-than-expected Chinese manufacturing data released Tuesday.

Asian shares were mixed. The Tokyo benchmark Nikkei 225 stock average fell 2.2 percent. The Sydney market index S. P./ASX 200 fell 1.1 percent. In Shanghai the composite index rose 1.4 percent, while the Hang Seng index in Hong Kong closed 1.9 percent higher.

The dollar fell against other major currencies. The euro rose to $1.3768 from $1.3703 late Tuesday in New York, while the British pound rose to $1.6006 from $1.5949.

The dollar fell to 78.11 yen from 78.37 yen, and to 0.8840 Swiss franc from 0.8871 franc.

Still, the currency market is likely to remain jumpy, analysts at Crédit Agricole C.I.B. wrote, as worries over Mr. Papandreou’s proposed referendum will probably persist for some time.

“The fact that this referendum may not take place until January will bring about a prolonged period of uncertainty and further downside risks for the euro against the U.S. dollar,” they said.

U.S. crude oil futures for December delivery rose 0.9 percent to $93.05 a barrel. Comex gold futures rose 0.8 percent to $1,711.80 an ounce.

Kevin Drew reported from Hong Kong. Sei Chong contributed from Hong Kong and Rachel Donadio from Athens.

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Wall St. Gains on Hopes for Europe Bank Plan

Stocks rose sharply on Monday, bolstered by a renewed pledge by France and Germany to come up with a plan by the end of the month to tackle the euro zone debt crisis and support the region’s banks.

On Wall Street, the Standard Poor’s 500-stock index closed up 3.4 percent, gaining 39.40 points to 1,194.87. The Dow Jones industrial average rose 329.53 points to 11,432.88, a rise of 3.0 percent, and the Nasdaq composite index added 3.5 percent. Trading volume of stocks in the S.P. 500 was down more than 36 percent from the average of the previous week because of the Columbus Day holiday in the United States. Traders said that the lower volume played a factor in the magnitude of the gains. The bond market was closed.

In Europe, the Euro Stoxx 50 closed up 2.3 percent. The FTSE 100 in London was up 1.8 percent and the DAX in Frankfurt rose 3 percent. Europe’s main volatility index dropped to its lowest level since early September.

“We’re getting signals on a lot of fronts that the end of the crisis is coming,” said Valerie Gastaldy, head of the Paris-based technical analysis firm Day By Day.

The S.P. 500 is now up more than 10 percent from a low last Tuesday that took the index briefly into a bear market. The advance has been driven by short-covering and managers buying stocks as they try to catch up to the sharp rally, analysts said.

Over the weekend, the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said they would work out a plan to recapitalize European banks, come up with a sustainable answer to Greece and accelerate economic coordination in the euro zone by the time of a Group of 20 gathering in Cannes, France, on Nov. 3-4.

“Recapitalizing the banks would be a strong signal sent to the market, even if banks don’t necessarily need fresh funds,” said Benoit de Broissia, an analyst at KBL Richelieu. The euro gained about 2 percent on the dollar, trading at $1.3648.

“What’s happening is traders are shorting the dollar, and using funds there, and piling into risk-based assets,” including equities, said Fred Dickson, chief market strategist at the Davidson Cos. in Lake Oswego, Oregon.

A move to nationalize Franco-Belgian bank Dexia was seen by some traders as an indication that governments would step in and keep large lenders from going under.

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Wall Street Loses Momentum After Rally

In afternoon trading, the Euro Stoxx 50 index, a gauge of blue-chip shares in the euro zone, rose 2.9 percent. In London, the FTSE 100 rose 2.3 percent.

On Wall Street, all three major market indexes opened slightly lower, with the Standard Poor’s 500-stock index off 0.5 percent.

On Tuesday, the SP 500 closed 2.3 percent higher, as a massive rally in the final hour of trading led stocks out of the deep losses where they had spent most of the day.

The bounce was attributed by some traders to reports that finance ministers from the 17 European Union nations that use the euro were considering taking more aggressive action to bolster the region’s ailing banks.

Nevertheless, traders remained cautious Wednesday. In addition to confusion over the latest rescue plan for Greece and signs that a double-dip recession is imminent, problems in the banking system, which could require more taxpayer aid, threatened to further undermine government finances.

“All but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings,” Moody’s Investors Service said on Wednesday, a day after it followed Standard Poor’s in cutting Italy’s credit rating, citing the country’s debt burden and paltry economic growth.

“Moody’s expects fewer countries below Aaa to retain high ratings,” the agency said, adding that “there are no immediate pressures that could cause downgrades for Aaa-rated countries.”

The momentum from Wall Street did not carry over into Asian markets, where most of the major indexes fell. The Nikkei 225 stock average in Tokyo fell 0.9 percent, the Hang Seng in Hong Kong fell 3.4 percent. But the SP/ASX 200 index in Sydney gained 1.4 percent.

The dollar was relatively stable, with the euro trading at $1.33.

American oil futures for November delivery rose 3 percent to $77.94 a barrel. Comex gold futures rose 0.6 percent to $1,625.90.

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Wall Street Rebounds in Early Trading

Shortly after trading started in New York, the Standard Poor’s 500-stock index rose 0.8 percent, while the Dow Jones industrial average climbed 1.1 percent. The Nasdaq composite index added 0.2 percent.

The benchmark Euro Stoxx 50 index rallied 2.1 percent in afternoon trading, rebounding from an early loss. The DAX climbed 2.2 percent in Frankfurt.

News reports from a conference at the International Monetary Fund in Washington over the weekend suggested that the German and French authorities have begun a major strategy to prevent the crisis escalating, culminating in a possible announcement at the next Group of 20 leaders’ summit meeting set for Nov. 4 in Cannes, France.

The plan was said to include bank recapitalizations similar to the United States Treasury Department’s Troubled Asset Relief Program, which started injecting capital into banks in 2008. News reports also suggested that the European Central Bank could lend extra funds to the European Financial Stability Fund, the main bailout mechanism in Europe.

There was no official comment, although Wolfgang Schäuble, Germany’s finance minister, said during the weekend that policy makers could make the financial stability fund more “efficient.” And he raised the prospect of bringing in a permanent financial support mechanism before 2013, the current target date.

Olli Rehn, the European Union’s monetary affairs commissioner, said that there was “increasing political will” among European leaders for a new effort to soothe investors.

Jim Reid and Colin Tan, Deutsche Bank analysts, said in a research note Monday: “The hope in Europe is that things are getting potentially so bad that the chances of seeing something much more substantial from the authorities over the next few weeks have surely increased.”

“If not,” the note continued, “then we will really have to think about a financial disaster in the Continent.”

Also supporting stocks in Europe on Monday, a European Central Bank governing council member, Ewald Nowotny, was quoted Monday by the news agency Market News International as saying that an interest rate cut by the bank could not be excluded.

Separately, a report showed that German business confidence in September had fallen less than economists had forecast. The Ifo Institute in Munich said its business climate index dropped for a third straight month to 107.5 points from 108.7 in August. Economists had forecast a decline to 106.5 points, according to Bloomberg News.

In the Asia-Pacific region, stocks declined, compounding the sharp falls they had suffered during the previous week.

In Japan, the Nikkei 225 index dropped 2.2 percent, ending at 8,374.13 points. The index has fallen nearly 500 points since Sept. 16 and is now at its lowest close since April 2009.

The Kospi in South Korea ended down 2.6 percent and the Taiex in Taiwan declined 2.4 percent on Monday. The Hang Seng was 1.5 percent lower.

The markets have for months been shrugging off the fact that most Asian economies — with the notable exception of Japan — are still poised to grow solidly, especially when compared to those of the United States and Europe, and have little direct exposure to the sovereign debt woes of Greece and other euro zone nations.

Many foreign investors have instead stayed on the sidelines or pulled funds into assets deemed safer, like Treasury bonds from the United States and currencies like the Swiss franc and Japanese yen.

But investor jitters have hit gold, which usually is considered a haven in times of uncertainty, and the precious metal fell to around $1,560 an ounce on Monday.

In London, the euro was higher against the dollar on Monday, trading at $1.3508.

Matthew Saltmarsh reported from London. Bettina Wassener contributed reporting from Hong Kong.

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