World stock markets rallied on Tuesday with expectations that euro zone officials were close to developing further strategic moves in order to combat the crisis that has plummeted European economies. Despite the lack of commitment by Dutch and Finnish officials for a euro-area bailout find, the rally in stock markets still continued.
Not only did Asian stocks rebound from their lowest levels since May 2010, European and US stocks also rallied. On Wall Street, the Dow jumped 2.53 percent; the S&P 500 added 2.33 percent and the Nasdaq Composite rose 1.35 percent. In Europe, London’s FTSE-100 gained 0.45 percent, the Paris CAC 40 added 1.75 percent and Frankfurt’s DAX was 2.87 percent up (AFP). After three sessions of swings on the commodities markets, oil, copper, gold and silver all rose. U.S. crude jumped nearly $2 a barrel. In addition, the US dollar, US Treasuries and Japanese government bonds all eased.
In a meeting which is to take place within the ECB on October 6th, finance officials are likely to debate restarting covered-bond purchases and may discuss interest-rate cuts in order to ease the funding strains. Further adding to the speculation is that France is expected to draft plans to re-capitalise the country’s over-exposed banks. Senior ECB officials have also indicated that the 440 billion euro bailout fund is likely to be increased in size.
The euro-zone is coming under increasing pressure to resolve its growing debt problems as the US, China and other nations urge further action within the region. In an interview with ABC’s “World News with Diane Sawyer” program, the U.S. Treasury Secretary Timothy F. Geithner mentioned that Europe’s crisis is “starting to hurt growth everywhere, in countries as far away as China, Brazil and India, Korea. And they heard the same message from us they heard from everybody else, which is it’s time to move.”
Major market players still insist that the markets are as turbulent as ever. Markets still lack the confidence and are thus highly susceptible to contagion. Fears still loom over a double crisis with the expectation of a renewed recession in the US and the ongoing euro-zone crisis. This has caused the euro to exhibit volatile swings over the past months. The IMF has warned that the global economy had “entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action” to cope with Europe’s unstable financial situation.