Share

European deal ignites rally in stocks

New York - World stocks surged and the euro jumped to a seven-week high against the dollar on Thursday after European leaders agreed on a sweeping plan to resolve the euro zone sovereign debt crisis.

European shares rose more than 3% and US stocks gained almost as much on the euphoria. The deal envisions a recapitalization of European banks, a far more powerful rescue fund for the euro zone and 50% losses for Greek debt holders.

For the moment, investors shrugged off the fact that key aspects of the deal, including the mechanics of boosting the firepower of the European Financial Stability Facility and providing Greek debt relief, could take weeks to finalize.

The euro surged past stop-loss points as investors reacted positively to the deal, gaining 2.3% to $1.4195.. Investors were forced to unwind bets against the single currency as they looked for more details.

“The key signal is officials are taking steps in the right direction, triggering this relief rally,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

World stocks extended gains to hit their highest level since early August, with the MSCI all-country equity index rising 4%.

In Europe, shares soared to their highest close in 12 weeks, with French banks, heavily exposed to euro zone peripheral debt, among the biggest gainers.

Credit Agricole gained 22% and BNP Paribas shot up 17%.

The FTSEurofirst 300 index of top European shares ended the session up 3.7% at 1 020.10, the highest close since Aug. 3.

“Decisions have been made, whatever they are, and that’s a good thing. I fear further down the road we’ll find they’re not as good as we thought,” said Gavin Launder, fund manager at Legal & General, which has 356 billion pounds ($570 billion) under management.

Data showing the U.S. economy grew at its fastest pace in a year in the third quarter as consumers and businesses stepped up spending also helped spur risk appetite.

US gross domestic product expanded at a 2.5% annual rate in the third quarter, the Commerce Department said.

On Wall Street, the Dow Jones industrial average was up 305.83 points, or 2.58%, at 12 174.87. The Standard & Poor’s 500 Index was up 35.29 points, or 2.84%, at 1 277.29. The Nasdaq Composite Index was up 72.82 points, or 2.75%, at 2 723.49.

Wall Street’s “fear gauge,” the CBOE Volatility Index, fell 15% in a sign of investor sentiment.

Crude oil jumped to $112 a barrel as the European debt deal and supportive US data eased concerns that economic weakness could curb energy demand. Oil later pared gains.

ICE Brent December crude rose $3.31 to $112.22 a barrel. U.S. light sweet crude oil rose $3.19 to $93.39 a barrel.

Prices of safe-haven US Treasuries and German Bunds fell, while those of highly indebted euro zone countries gained.

The benchmark 10-year US Treasury note was down 30/32 in price to yield 2.31%.

Spot gold prices rose $22.54 to $1 746.20 an ounce.
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.95
-0.1%
Rand - Pound
23.91
-0.0%
Rand - Euro
20.42
+0.1%
Rand - Aus dollar
12.34
+0.0%
Rand - Yen
0.13
-0.1%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders