THE highly volatile stock market experienced soaring shares yesterday as hopes rose of a rescue plan for the crisis-hit eurozone.
The FTSE-100 share index closed 205 points, or 4%, higher at 5295, its biggest one-day gain since May 2010. More than £53 billion was added to the index.
A surge in banking stocks helped Germany’s Dax rise by more than 5% and France’s CAC 40 by almost 6%.
The current optimism of a breakthrough is based more on hope than a concrete plan and, while shares rose yesterday, analysts expect more volatility in the run-in to November 3 when world leaders are expected to finalise a plan at the G20 summit in Cannes. US President Barack Obama has said the eurozone crisis “is scaring the world”.
Keith Bowman, a market analyst, warned the rise in share prices could be shortlived. He said: “The optimists have taken the forefront on hopes we could see European politicians getting to grips with the current situation over the coming weeks. But there are still a lot of concerns. Investors remain sceptical about the success of the measures being planned to resolve the eurozone credit crisis.”
Although European Union officials maintain no eurozone deal has been struck, sources out of Washington, where the IMF is based, have sketched out a three-point plan, involving a 50% write-off of Greek debt, leveraging up to $2 trillion for a eurozone bailout fund, the European Financial Stability Facility (EFSF), and recapitalising banks to strengthen them in the event of any default.
Lorenzo Bini Smaghi, a board member of the European Central Bank, fuelled expectations of a larger bailout pool by saying policy-makers were indeed working on “how to leverage the money out of the EFSF in a more innovative and efficient way”.
In Berlin, it seems certain Angela Merkel, the German Chancellor, will tomorrow get enough votes in the Bundestag to approve crucial reforms to the eurozone bailout fund albeit on the back of support from opposition politicians.
Yesterday, German Finance Minister Wolfgang Schaeuble sought to allay the fears of his eurosceptic colleagues by denying any increase to the EFSF was planned. “We do not intend to increase it,” he insisted.
Some analysts noted how, technically, this was not a denial the fund could be leveraged up to raise more money. What worries German MPs is someone will have to pay for the increased fund, ie German taxpayers.
Last night, Mrs Merkel was due to meet George Papandreou, the Greek Prime Minister, after he promised German industrialists Greece would meet its commitments under the EU/IMF rescue programme despite having already missed key fiscal targets. “I can guarantee Greece will live up to all its commitments,” declared Mr Papandreou.
Mrs Merkel, at the same forum, said: “We will provide all the help desired from the German side so Greece regains trust.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article