European stocks rallied the most in 17 months after policy makers unveiled an unprecedented loan package worth almost $1 trillion to stop the region's sovereign- debt crisis. Asian shares and U.S. index futures soared.
BNP Paribas SA, France's biggest bank, and
Deutsche Bank AG jumped the most in more than a year, leading financial shares higher. Banco Santander SA surged 18 percent, leading Spain's benchmark IBEX 35 to the biggest gain on record. BHP Billiton Ltd., the world's largest mining company, and Rio Tinto Group climbed more than 6.5 percent as copper increased.
The Stoxx Europe 600 Index soared 6.2 percent to 251.89 at 12:07 p.m. in London, the biggest intraday gain since December 2008, as only one stock declined. The gauge last week posted the biggest drop in 18 months as concern grew that the region's leaders will be unable to contain the spiraling government debt crisis. The measure has retreated 7.4 percent from this year's high on April 15.
“This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion,” Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note.
The steps came after failure to contain Greece's fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.'s collapse. European stocks sank the most in 18 months, with the Stoxx Europe 600 Index tumbling 8.8 percent.
The ripple effect in the U.S., including a brief 1,000- point drop in the Dow Jones Industrial Average on May 6, prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy to urge “resolute steps” to prevent the crisis from cascading around the world.
“There is intent behind these measures and that is helping the markets,” said Christoph Riniker, a strategist at Bank Julius Baer Group Ltd. in Zurich, which manages about $226 billion. “Last week showed that we needed measures from central banks and we've almost recovered from last week's losses. The fundamental picture still points to improvement towards the end of the year.”
Futures on the Standard & Poor's 500 Index surged 4.4 percent today and the MSCI Asia Pacific Index rose 1.5 percent. The VStoxx Index, which measures the cost of insuring against declines in the Euro Stoxx 50 Index, lost 23 percent to 38.03, on course for the biggest drop on record.
Jolted into action by last week's slide in the euro to a 14-month low and soaring bond yields in Portugal and Spain, the European Union agreed to offer financial assistance to countries facing instability worth as much as 750 billion euros ($980 billion), including International Monetary Fund backing. The European Central Bank said it will counter “severe tensions” in certain markets by purchasing government and private debt and restarted a dollar-swap line with the Federal Reserve.
The support package “shows the ECB, the EU and IMF can act quickly, in spite of all indications to the contrary during the ECB press conference last Thursday and in spite of all doubts about their ability to do so by most U.S. investors last week,”
Credit Suisse Group AG's London-based strategist Andrew Garthwaite wrote in a report today. “Ultimately, this will lead all central banks (apart from China) to have a looser monetary policy for longer.”
The Bank of England maintained its emergency economic stimulus today as the post-election deadlock leaves officials in suspense on the scope of government spending cuts to curb the record budget deficit. The Monetary Policy Committee kept its bond holdings at 200 billion pounds ($297 billion) for a fourth month and maintained the benchmark interest rate at a record low of 0.5 percent.
Against the backdrop of Europe's fiscal crisis, the global economy has been strengthening. German industrial production rose more than economists forecast in March as the construction industry shrugged off the coldest winter in 14 years. U.S. employers added the most jobs in four years in April, the Labor Department said May 7.
A measure of bank stocks in the Stoxx 600 rallied 13 percent, the biggest advance since September 2008. BNP Paribas jumped 19 percent to 52.08 euros, the biggest gain in 14 months. Deutsche Bank, the largest German lender, surged 12 percent to 51.37 euros, the most since April 2009.
Santander, Spain's biggest bank, jumped 18 percent to 9.13 euros, the largest increase since 1990. Dexia SA, Belgium's biggest bank by assets, soared 17 percent to 3.85 euros. Allied Irish Banks Plc rallied 27 percent to 1.41 euros. National Bank of Greece SA advanced 19 percent to 12.32 euros.
BHP Billiton advanced 6.6 percent to 1,987.5 pence. Rio Tinto, the world's third-biggest mining company, rose 7.7 percent to 3,369.5 pence. Copper surged 3 percent in London, ending the longest losing streak since January.
Anglo American Plc rallied 8.7 percent to 2,719 pence. The owner of stakes in the world's biggest platinum and diamond producers said it sold its zinc asset portfolio to Vedanta Resources Plc for $1.34 billion. Vedanta increased 11 percent to 2,567 pence
Bilfinger Berger AG surged 9.6 percent to 31 euros. Germany's second-biggest builder said first-quarter net income rose to 48 million euros from 23 million euros and forecast output volume will gain.
