28 Oct 2011

Markets welcome eurozone debt deal

9:44 am on 28 October 2011

Stockmarkets reacted positively on Thursday after European leaders agreed on a deal to tackle the euro zone sovereign debt crisis.

European shares rose by more than 3%. Stocks in the United States also gained.

The Dow Jones Industrial Average closed up 2.86%, while the S&P 500 jumped 3.43% and the Nasdaq Composite was up 3.32%.

The FTSE in London was up 2.77%, the DAX in Frankfurt was up 5.12% and the CAC-40 in Paris was up 6.21.

Banks led the rally: Credit Agricole in France was up 20%, Societe Generale rose 19% and BNP Paribas gained 15%.

In Britain, Barclays rose 16%, Royal Bank Of Scotland rose 10% and Commerzbank and Deutsche Bank gained 14% in Germany.

In the US, Bank of America was up 7.0% and JP Morgan 5.4%.

In Athens, the heart of the crisis, stocks jumped 4.8%. Some Greek banks were more than 10% higher.

Earlier on Thursday, Tokyo stocks jumped 2% and 2.7% in Hong Kong.

Stock markets in Europe and Asia have seen sharp falls this year due to fears that the crisis was not going to be resolved and may even lead to a Greek default.

The agreement, reached in Brussels late on Thursday morning, means private banks will accept a 50% loss on Greek debt, banks will be forced to raise more capital to shield them against defaults and the bailout fund for countries using the euro will be boosted to 1 trillion euros ($US1.4 trillion).

But the BBC reports many details are still to be worked out. Analysts remain sceptical, saying the devil is still in the detail, which remains scant.

Centre for European Reform chief economist Simon Tilford says much has been made of boosting the bailout fund, but there's no new money on the table.

NZ and Australian currency up

The New Zealand dollar surged after European leaders agreed on the deal to help resolve the debt crisis.

The kiwi gained more than a cent to almost 82 US cents while the Australian dollar also rose strongly.

At 8.20am on Friday, the New Zealand dollar was trading at 82.09 US cents, 76.51 Australian cents, 50.97 pence, 62.35 yen and 0.5781 euro. The Trade Weighted Index was at 70.39.

Brent crude oil was trading at $US113.17 per barrel and gold was trading at $US1745.50 per ounce.