European stocks shot up, banks shares leapt and the euro rose yesterday after leading central banks launched concerted action to provide dollars to cash-squeezed markets spooked by the eurozone crisis.
A shortage of dollars for European banks, deserted by their usual sources of finance, had thrown a black cloud over some top banking names, especially in France, and added yet another hardship to investors that also face a global slowdown.
At close, Paris’ CAC-40 rose 3.27 percent to 3,045.62 points with French banks shares rocketing. BNP Paribas rose 13.4 per cent, Societe Generale 5.4 per cent and Credit Agricole 5.89 per cent.
In Frankfurt, the DAX index of leading shares closed up 3.15 per cent to 5,508.24 points and in London the FTSE-100 gained 2.11 per cent to 5,337.54 points.
Elsewhere in Europe, Milan jumped 3.56 per cent, Madrid 3.63 per cent, Brussels 2.02 per cent, and Zurich nudged up 0.29 per cent the day Swiss bank UBS said a rogue trader lost the company $2 billion.
US stocks rose in midday trade with the Dow Jones Industrial Average climbing by 0.95 per cent to 11,247.72 points, while the S&P 500 was up 0.95 per cent to 1189.44 points and the Nasdaq rose 0.86 per cent to 2,273.22 points.
The euro jumped over the $1.39 level for the first time this week following the announcement, before retreating to $1.3866, still up from $1.3750 late in New York on Wednesday. The dollar rose slightly to 76.69 yen from 76.64 from yen on Wednesday.
European banks have recently run into serious problems in borrowing dollars mainly because US funds that normally lend to them have become reluctant to do so for fear of contagion from the eurozone debt crisis.
Just on Wednesday, the ECB said it lent $575 million to two unnamed eurozone banks in a sign that credit problems were becoming urgent.
Joint central bank action was “a natural reaction to latest events. There had been increasing evidence that European banks had problems getting dollar funding in the US, both in the interbank market and the Fed’s liquidity window,” said Carsten Brzeski, senior economist at ING Belgium.
“It shows that the ECB remains determined to do everything it can to fight the symptoms of the sovereign debt crisis,” the analyst said.
The news came as markets were already trading up after France and Germany issued a joint defence of Greece, insisting that its place was in the eurozone despite market sentiment it might default.