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Bloomberg
Stocks and the euro surged, while Treasuries slid, as the European Central Bank and international policy makers coordinated to lend dollars to banks to help tame the credit crisis. Energy and metals led commodities higher.
The Standard & Poor’s 500 Index increased 1.1 percent to 1,201.47 . New York time and benchmark indexes for Germany and France surged more than 3.4 percent.
The euro strengthened against 14 of 16 major peers, surging 1 percent to $1.3885 for its strongest rally in a month, according to Bloomberg report.
The 10-year Treasury yield jumped 11 basis points to 2.10 percent and gold futures sank 2 percent as investors pursued riskier assets. Gasoline and lead jumped more than 2 percent as 15 of 24 commodities tracked by the S&P GSCI Index advanced.
The ECB said it coordinated with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year.
The announcement added to optimism that policy makers were containing the European sovereign debt crisis after the leaders of France and Germany yesterday confirmed they will support Greece’s continued participation in the shared euro currency.
“It is about protecting the liquidity of the European banks,” Howard Ward, a money manager who helps oversee about $436.1 billion for Gamco Investors Inc. in Rye, New York, wrote in an e-mail.
“The private sector has pulled back from funding these banks. So central banks are stepping in to make that dollar funding available. Good news is the banks get their dollar funding. Bad news is that the situation has gotten this dire.”
U.S. stocks rallied for a fourth straight day as receding concern about Europe’s government debt crisis overshadowed economic data pointing to a weakening recovery.
The Fed Bank of New York’s general economic index dropped to minus 8.8, the weakest reading since November, from minus 7.7 in August.
Economists projected an increase to minus 4, based on the median of 54 forecasts in a Bloomberg survey. Jobless claims rose more than the median economist forecast to 428,000, the highest level since June, the Labor Department said.
JPMorgan Chase & Co. surged 2.4 percent to lead gains in 26 of 30 stocks in the Dow Jones Industrial Average. All 10 of the main industry groups in the S&P 500 advanced, with industrial and financial companies leading the rally.
The Stoxx 600 advanced for a third day, surging 2.3 percent, as banks led gains in all 19 industry groups. BNP Paribas SA surged 12 percent in Paris and Italy’s Intesa Sanpaolo jumped 9.4 percent.
“It’s nice to see that the risk factors coming out of Europe are abating somewhat,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “That addresses the liquidity issue that would be threatening the European banking system.”
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