US shares rose Monday as investors were calmed by the promises made by French and German leaders on Sunday to protect European banks from the sovereign debt crisis in the eurozone. Markets also were more confident after the announcement that Franco-Belgian bank Dexia would be bailed out.
US Shares Increased
The Dow Jones index closed up 3%, with a gain of 330 points to 11,455, though trading was low. European markets saw gains in trading Monday. Oil prices increased with US light crude and Brent crude both up 3.5%. Light crude increased $2.92 a barrel to $85.90. Brent crude increased by $3.61 to a total of $109.49. Both France’s Cac 40 and the UK’s FTSE 100 were 2% higher and Germany’s Dax rose 3%.
Andrew Busch from BMO Capital Markets had this to say on the matter, “For now, the markets are rallying on the belief that there is forward momentum on dealing with the European bank crisis. To me, this is an exercise in placing funding sand bags around the global banks to ensure they are not flooded by the rising river level of a Greek default.”
The Key Vote
Greece is awaiting the bailout funds after a key vote from Slovakia, the last of the 17 member states to vote on the bailout plans. The plans for the bailout fund are still seen as not good enough to help the country, with plans to make private investors absorb the costs of a default not viewed as good enough.
Both Germany and France said they would do what was necessary in order to make sure European banks could be recapitalized. This announcement came after discussions with French President Nicolas Sarkozy and German Chancellor Angela Merkel in Berlin on Sunday.
Both leaders said they were coming close to a plan to make sure the crisis was abated, and they would announce the details of this plan before long. Markets have rallied on hopes that a solution will be reached, after much criticism of the amount of time taken by eurozone leaders, necessitated by EU policy. Experts await the G20 meeting in Cannes, which will take place at the beginning of November for what will happen next.