World markets climb as EU moves to defend euro

[May 10, 2010]  SINGAPORE (AP) -- World stock markets surged Monday as the European Union agreed on a nearly $1 trillion defense package for the embattled euro, hoping to contain global fallout from Greece's debt crisis and protect the common currency.

As trading opened in Europe, Britain's FTSE 100 index soared 227.03 points, or 4.4 percent, to 5,350.05, Germany's DAX climbed 4.3 percent while the CAC-40 in France vaulted 7.3 percent.

Earlier in Asia, Japan's Nikkei 225 stock average rose 1.6 percent to 10,530.71 and Hong Kong's Hang Seng index jumped 2.5 percent to 20,426.64. Other major benchmarks in Asia advanced as relieved investors began buying after big declines last week.

The euro traded at $1.3044, up from the 14-month low of $1.2523 it hit late last week after a euro110 billion ($142 billion) loan package to Greece failed to calm markets. Stock futures suggested Wall Street would welcome the euro defense plan as Dow futures climbed 345 points, or 3.3 percent, to 10,680.

"It could very well be that the storm has been weathered," said Tim Condon, head of Asia research for ING in Singapore. Europe's top finance officials were obviously "very shocked" by the market skepticism over the bailout of Greece, triggering Monday's headline-grabbing measures, he said.

Under the three-year plan, the EU Commission will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro440 billion ($570 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or euro250 billion, Spanish Finance Minister Elena Salgado said.

The Federal Reserve followed by opening a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent. Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank, are also involved in the effort.

Some analysts said the measures may not bolster investor confidence in the creditworthiness of all European countries, and there could be more speculative attacks on the debt of nations with weak finances.

"The bond market vigilantes are still hungry, they smell blood," said David Cohen, an economist with Action Economics in Singapore. "This package is trying to short circuit that process but it could be like the 1997-1998 Asian crisis where countries were attacked one by one."

Early Saturday, the eurozone leaders gave final approval for an euro80 billion ($100 billion) rescue package of loans to Greece for the next three years to keep it from imploding. The International Monetary Fund also approved its part of the rescue package -- euro30 billion ($40 billion) worth of loans -- in Washington on Sunday.

Together, the IMF and EU bailouts give Greece enough money to avoid having to raise private funds for two years, IMF officials said.

In New York on Friday, the Dow Jones industrials closed down 1.3 percent, at 10,380.43.

The dollar rose to 93.29 yen from 92.37 yen late Friday.

Benchmark crude for June delivery was up $2.87 to $77.98 a barrel in electronic trading on the New York Mercantile Exchange. The June contract fell $2 to settle at $75.11 on Friday.

[Associated Press; By ALEX KENNEDY]

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