Global Markets Rally on G-20 Commitment

123jump.com Staff
02 Apr, 2009
New York City

U.S. stocks surged and European markets closed sharply higher after the Group of 20 summit generated another round of commitment to bailout banks and finance international trade. Relaxed accounting rules also helped banks and financial services stocks to rise. Crude oil surges 8% and copper gains.

[R]12:45 PM New York, 5:45PM London – The new commitments of $1.1 trillion to bailout banks and support international trade and relaxed U.S. rules for banks to value their troubled assets created a global rally in stocks. Markets in Europe closed up 4% and in New York surged to two months high.[/R]

U.S. stocks surged and European markets closed sharply higher after the Group of 20 summit generated another round of commitment to bailout banks and finance international trade. Relaxed accounting rules also helped banks and financial services stocks to rise.

Crude oil surged nearly 8%, copper tested five month peak but gold dropped near $900 price level. The 95% of the stocks in S&P 500 index traded higher and 55 stocks jumped more than 10%. Nearly 10 stocks in the index traded up 18%.

ECB Lowers Rates

The European Central Bank lowered its key lending rate down to 1.25% from 1.5%. The rate cut was smaller than expected and bank is quickly running out of options to stimulate the economy.

The ECB cuts two other lending rates as well with the aim of providing more liquidity in the financial system. The deposit rate was lowered to 0.25% from 0.5% and marginal lending rate was trimmed to 2.25% from 2.5%.

G 20 Summit Offers $1.1 Trillion in Loan Guarantees

The focus of world leaders at the Group of 20 summit in London remain divided. While the European nations are focused on better regulations the U.S. wants more stimulus from Europe and UK prefer commitment to more global trade focused financial commitment.

The traditional US-UK alliance is still looking for the free capital mobility but do want hedge and other fund managers to restrict with higher tighter regulations. France and Germany are looking for the root cause of the crisis which has its origin in the U.S.

French President Nicolas Sarkozy put the blame squarely on the lax supervision at rating agencies in the U.S. and greed that drove hedge fund managers in the U.S. and UK. German Chancellor Angela Merkel in a joint-press conference with Sarkozy reiterated their position for faster and tighter regulations as “nonnegotiable.”

The Group of 20 at the conclusion of the meeting appeared to be united in cracking down on tax haven commit $1.1 trillion in loans and guarantees to finance trade and bailout banks and restrict pay and bonuses to the bankers that engaged in rampant speculation in mortgage securities.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 367.87 or 4.40% to 8,719.78, Hang Seng index in Hong Kong increased 1,002.43 or 7.41% closed to 14,521.97, CSI 300 index in China higher 28.18 or 1.11% closed to 2,576.40. ASX 200 index in Australia increased 100.50 or 2.81% closed to 3,680.20. The KL Composite index in Malaysia higher 20.89 or 2.36% closed to 905.07.

The Kospi Index in South Korea increased 43.61 or 3.54% to close at 1,276.97. SET index in Thailand closed higher 12.87 or 2.99% to 442.96 and JSE Index in Indonesia increased 37.98 or 2.60% closed to 1,499.73. The Sensex index in India increased 446.84 or 4.51% closed to 10,348.83.

Europe Markets Review

In London FTSE 100 Index traded higher 115.80 or 2.93% to 4,071.41, in Paris CAC 40 Index increased 108.43 or 3.82% to 2,948.04 and in Frankfurt DAX index traded higher 173.20 or 4.19% to 4,304.27. In Zurich trading SMI increased 117.15 or 2.34% to 5,132.05.