Monday November 24, 10:21 PM
US, European stocks soar on Citigroup rescue, govt stimulus
 |
NEW YORK (AFP) - Wall Street and European stock markets soared Monday as investors cheered a massive bailout for US banking giant Citigroup (NYSE: C - news) and the prospect of more government money to ease the pain of recession.
Citigroup shares, which slumped last week to historic lows, jumped nearly 60 percent in a spectacular reversal of fortunes that sparked gains in other downtrodden financials and broad rallies of 10 percent and more in Europe.
The Dow Jones Industrial Average vaulted 4.93 percent to close at 8,443.39 while the Nasdaq composite (NASDAQ: news) soared 6.33 percent to 1,472.02.
The Standard & Poor's 500 index surged 6.47 percent to 851.81.
Coming off the heels of massive losses last week, the rally was the second in two sessions for Wall Street. It followed Friday's comeback on news that president-elect Barack Obama was to name seasoned New York Fed chief Timothy Geithner as his Treasury secretary to head economic policy.
The gains extended after news of the US government rescue of Citigroup, which got fresh capital and a guarantee for its troubled mortgage assets, averting a possible collapse.
Liz Ann Sonders at Charles Schwab & Co. said Citigroup's existing shareholders "will be diluted in the near term, but over the longer term, the stock could be supported by the removal of the troubled assets."
Additionally, she said the plan "could become a template for other large banks facing burgeoning losses."
Amanda Collier at Hilliard Lyons said investors appeared "relieved" over the Citi bailout as well as the confirmation of the Obama economic team and a pledge by Obama to move quickly on the economy.
"The team was urged to quickly develop possibilities for 'Wall Street and Main Street' recovery plans," she said.
For Citigroup, the government agreed to back some 300 billion dollars in troubled mortgage assets and inject another 20 billion dollars in capital, boosting its stake in one of the world's biggest banks.
"The failure of Citi, with its two trillion dollar balance sheet, would have been absolutely catastrophic to the global banking system," said Fred Dickson at DA Davidson & Co.
"The government is making sure Citi doesn't fail ... At a minimum, the Fed's action should trigger a near-term short-covering rally in the big banks."
In London, the FTSE index of leading shares jumped 9.84 percent to 4.152.96 as a British government stimulus package added to the early momentum on the Citigroup announcement.
British finance minister Alistair Darling, launching a 20-billion-pound (23 billion euros, 30 billion dollars) package, said: "I will do whatever it takes to support people through these difficult times.
"We need action now to boost economic activity ... to help us emerge quicker and emerge stronger from these difficult times," he added, forecasting the economy would contract in 2009.
Elsewhere in Europe, the CAC 40 (Paris: news) index in Paris gained 10.09 percent, its second biggest ever single day gain, to 3,172.11 and in Frankfurt the DAX (Xetra: news) advanced 10.34 percent to 4,554.33.
Paul Nolte at Hinsdale Investments said the market was ripe for a rebound after the bruising losses of the past few weeks, making the case for buying now at the lows despite all the bad news still making the headlines.
"After reviewing the carnage of the past months, we can now say that stocks are priced to provide the best returns that we have seen ... only a couple of times over the past 80-plus years," Nolte said.
"What is being missed by investors wallowing in the current heap of bad news is that the future ... does look bright given the very low current valuations."
In other markets, Sao Paulo's Bovespa (news) index climbed 9.4 percent and the S&PTSX index in Toronto added 3.5 percent. Mexico's Bolsa index tacked on 7.0 percent.
In Asia, Tokyo was closed for a public holiday, dampening the region overall, with Hong Kong stock closing down 1.6 percent while Sydney edged up 0.3 percent.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
