Market: Stocks Rise On Eurozone Rescue Hopes

Talks of a pan-European effort spur a market rally.

Talks of a pan-European effort spur a market rally.

Markets rallied on Wednesday after reports that European policymakers are deliberating co-ordinated action to fight against the current sovereign debt crisis plaguing the eurozone.

European markets saw a lift of 3% to 5%, while the US market also performed well.

The market rally comes despite recent news that Italy’s credit has been downgraded by Moody’s as of Tuesday.

Germany’s role

German support is seen as integral to the success of any eurozone rescue proposal, as the German economy is the biggest in Europe.

German Chancellor Angela Merkel has thrown her weight behind a co-operative, pan-European measure to recapitalise the eurozone, and has said she is also ready to help German debts fight the write-off of Greek debt, should that occur.

European commissioner for economic affairs Olli Rehn called for a united plan to save the eurozone and said, “There is an increasingly shared view that we need a concerted, co-ordinated approach.”

The International Monetary Fund (IMF) has also advised that eurozone governments back their banks together, and has estimated that the cost of doing so is 200bn euros.

Despite the huge price tag, this is within the reach of the eurozone bailout fund, the European Financial Stability Facility (EFSF).

Banks on the rise

Reports that European leaders were ready to come together in action started on Tuesday, when it was announced that Franco-Belgian banking firm Dexia was to be ringfence its debt-laden debt operations away from its commercial banking.

The news led to a 10% jump in Dexia shares, but closed at only a 1.4% raise.

The trend in rising banking shares continued, as France’s three biggest banks also rose sharply in the market. Credit Agricole finished the day’s tradings up by 9.9% despite being heavily exposed to Greek debt.

The UK’s Barclays rose 7.7% on Wednesday while RBS closed at 5% higher for the day.

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