Business

US shares join world markets in eurozone deal rally

  • 27 October 2011
  • From the section Business

US markets have joined Europe's rally after eurozone leaders agreed a deal to help resolve the debt crisis.

The eurozone agreed a deal on expanding the bailout fund and banks taking losses on Greek debt in exchange for recapitalisation.

The biggest gainers were banks, led by French institutions, which are the most exposed to Greek debt, with some up by 20%.

The Dow Jones index closed 2.86% higher at 12,208.55 points.

London's 100 share index finished up 2.9%, France's Cac up 6% and Germany's Dax 5% higher.

Banks led the rally, with Bank of America up almost 10% and JP Morgan 8% higher.

France's Societe Generale was up 23%, Credit Agricole up 22% and BNP Paribas gained 17%.

In the UK, Barclays rose 18%, Royal Bank of Scotland rose 10%, while in Germany Commerzbank and Deutsche Bank were both up more than 16%.

The euro was higher, rising 2.3% against the dollar to $1.42, the pound fell 1.37% to 1 euro 13.3 cents.

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

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.

Deal reached

Leaders from all 27 European Union nations have finally thrashed out a deal to solve the crisis started by concern over how Greece would cope with its debts.

Greece, the Irish Republic and Portugal have all required bailouts and this last week of talks was prompted by fears the crisis would spread to the larger economies of Spain and Italy.

Late on Thursday morning, the EU leaders meeting in Brussels agreed to expand the eurozone's main bailout fund to 1tn euros ($1.4tn; £880bn).

Banks also accepted a loss of 50% on Greek debt, and they must raise more capital to protect themselves against losses resulting from any future defaults.

Under the deal, Greek debt would drop from 160% of GDP to 120% by 2020.

EU leaders said measures to restore confidence in the bloc's banks "are urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector".

The agreement replaced a deal that had been reached at a July summit, when the eurozone offered 109bn euros in aid and banks agreed to take a 21% loss on their debt holdings.

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

Stocks in Sydney, which had been unable to open for four hours due to a technical glitch, eventually rose 1.8%. The Shanghai index added 0.4%.