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World markets soar on possible US rescue package PDF Print E-mail
Saturday, 20 September 2008

AP, FRANKFURT, Germany -- Global stock markets roared higher on Friday after news of a possible U.S. government plan to rescue banks from toxic mortgage debt raised a collective sense of hope amid the world's worst financial crisis in decades.

Europe exchanges, which had spent nearly all of this week drowning in declines responded with ferocity to the possible plan, surging as battered bank stocks rebounding along with them.
 
The news of a likely U.S. lifeline, along with new changes to short-selling in the U.S., Britain and Ireland, also helped push markets higher, analysts said.
 
Early Friday, the U.S. Securities and Exchange Commission took the dramatic step of temporarily banning the routine practice of betting against company stocks, announcing the move on its Web site.
 
The commission said it was acting in concert with Britain's Financial Services Authority in taking emergency action to ''prohibit short selling in financial companies'' to protect the integrity of the securities market and boost investor confidence.
 
''The short-term changes to short selling are certainly giving markets and regulators room to breathe,'' said Keith Bowman, equity analyst Hargreaves Lansdown Stockbrokers. ''But there are going to be a significant number of hurdles to overcome for this temporary measure to prove useful at solving the fundamental problems over the long term.''
 
Another factor were moves by the European Central Bank, Swiss National Bank and Bank of England to offer up more cash Friday. The three banks put a combined $90 billion into money markets in a lockstep move.
 
London's FTSE jumped more than 7 percent, led higher by Lloyds TSB, which gained some 30 percent in trading only a day after sentiment about its financial strength hobbled its appeal.
 
In Frankfurt, the DAX index sprung more than 4 percent higher with shares of Commerzbank AG and Deutsche Bank AG leaping 18.6 percent and nearly 16 percent, respectively.
 
The Irish Stock Exchange responded with its biggest burst in Dublin trading history, rising more than 25 percent in the first hour. The financials-heavy index soon settled back on profit-taking, but remained up nearly 12 percent at 4,175 in midmorning trade.
 
The most dramatic gains were scored by Anglo-Irish Bank, a niche lender that had been heavily targeted by short-sellers in recent weeks, knocking two-thirds off its market capitalization.
 
Anglo-Irish stock value initially surged by an incredible 120 percent, then settled back, still up more than 35 percent. Allied Irish rose 19.7 percent, Bank of Ireland 28.3 percent, and Irish Life & Permanent 21.6 percent.
 
Irish regulators also banned short-selling on the stocks of the country's four largest financials: Allied Irish Banks, Bank of Ireland, Irish Life & Permanent and Anglo-Irish Bank Corp.
 
Russia's leading stock exchanges suspended trading for a second time in several hours after stocks rose too sharply. Earlier Friday, trading was suspended on both the RTS and MICEX within an hour of opening, in line with exchange rules. They reopened after an hour only to close again.
 
MICEX, where most share trading takes place, was up 25.4 percent since the start of Friday after two-day suspension. The RTS was up 20.2 percent. Both indexes were closed on Wednesday for two days after the MICEX suffered one-day losses on a scale not seen since Russia's 1998 financial collapse. It plunged 25 percent in just 2 1/2 days on the back of tumbling oil prices and Wall Street turmoil, and was down more than 55 percent since its May peak.
 
Austria's ATX surged past 9 percent in early afternoon trade after opening about 8 percent higher earlier Friday. In Madrid, the SMSI was up nearly 6.2 percent while Swedish shares climbed 6.8 percent higher in Stockholm. In Belgium, shares gained 7.5 percent on the Euronext Bel-20.
 
Across Asia, similar spikes were seen around the region. Hong Kong's Hang Seng Index surged a stunning 9.6 percent to 19,327.73, while Japan's Nikkei 225 average rose 3.8 percent to 11,920.86.
 
In China, the Shanghai benchmark jumped 9.5 percent -- its biggest gain ever -- after the government eliminated a tax on share purchases and said it was buying shares in state-owned banks.
 
The global turnaround came after investors took to heart word that the U.S. government was seeking the power to rescue banks by buying distressed assets at the heart of the financial system turmoil that's brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns.
 
Details of the plan were still being worked out, but U.S. Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill Thursday to say he hoped to have a solution ''aimed right at the heart of this problem.''
 
''It definitely gives investors a light at the end of the tunnel,'' said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. ''The solution is of such a magnitude that it could eventually fix the problems ... That's hugely important at the moment because that's what markets are focused on.''
 
Oil prices were above $100 a barrel Friday, with light, sweet crude for October delivery rose $2.16 to $100.04 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. Overnight, the contract rose 72 cents to settle at $97.88.
 
The euro fell to $1.4221 in European trading from the $$1.4247 it bought in New York late Thursday.
 
The British pound drifted down to $1.8019 from $1.8076, while the dollar rose to 107.40 Japanese yen from 106.19 yen.

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