Stocks soared on Monday after the leaders of France and Germany agreed to finalize a deal by the end of October to solve the debt crisis plaguing Europe. A little reassurance from Nicolas Sarkozy and Angela Merkel went a long way. Via Bloomberg Businessweek:
The Standard & Poor’s 500 Index surged 2.6 percent to 1,185.38 at 3:17 p.m. New York time. The Stoxx Europe 600 Index climbed 1.7 percent to cap a four-day rally of 8.5 percent, its largest over that stretch of time since November 2008. The 17- nation euro currency appreciated 2 percent versus the dollar as it strengthened against 11 of 16 major peers. The S&P GSCI gauge of raw materials increased 2 percent. Costs to protect against a European sovereign default decreased.
The S&P 500 has rebounded 7.8 percent from a 13-month low on Oct. 3 amid optimism that European leaders will succeed in taming the debt crisis and as U.S. economic data topped estimates. German Chancellor Angela Merkel and French President Nicolas Sarkozy said yesterday they will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit. Reports this week may show U.S. retail sales increased in September at the fastest pace in six months, adding to evidence that growth is rebounding.
The mood was that of a "relief rally," one banker told the magazine. Even if a Greek default is inevitable, Merkel's and Sarkozy's pledge to craft a deal means that one country's failure won't send the entire Eurozone over the cliff — and a bunch of European and American banks with it.
Ten stocks rose for everyone that fell on the New York Stock Exchange, the Associated Press reported, though trading was light and bonds were idle because of the Columbus Day holiday.
The good mood was a surprise to some, and an indication of trust that a deal would be worked out, not evidence that its terms were already decided.
“The optimism is amazing to me," Jim Iuorio of TJM Institutional Services told CNBC. "I don’t think any market participant is saying things are fixed in Europe, but what they’re hoping is that by the time Europe starts to resurface again in a few months from now, there will be traction in our economy that will be enough of a positive to wipe out the negative there."
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.