Financial markets around the world stormed higher Friday after European leaders came up with a breakthrough plan to rescue banks, relieve debt-burdened governments and restore investor confidence.
Financial markets around the world stormed higher Friday after European leaders came up with a breakthrough plan to rescue banks, relieve debt-burdened governments and restore investor confidence.
The Dow Jones industrial average climbed 277 points, its second-biggest gain this year, and stocks advanced even further in Europe, in strong and weak countries alike.
The price of oil posted its biggest one-day increase in more than three years, and other commodities shot higher — signs of hope a deal in Europe will remove a big barrier to a healthier world economy.
In Brussels, leaders of the 17 countries that use the euro appeared finally to have found a broad strategy to fight a debt crisis that has hounded European governments and world investors for three years.
The leaders agreed to pump money directly into stricken banks, let some countries tap into rescue money without submitting to stringent budget requirements and, later, tie European governments closer in economic union.
David Kelly, chief global strategist at JPMorgan Funds, said it was becoming clear European leaders will compromise to solve the crisis. One of the biggest stock gains Friday came in Germany, which took a hard line in earlier negotiations.
“The whole language is positive here,” he said. “Every time they’ve stared over the cliff into the abyss of a euro breakup, they’ve realized it’s much wiser to get closer together.”
There was a sign immediately that Europe’s latest plan was working: The cost for the troubled government of Spain to borrow money on the bond market fell dramatically, by more than half a percentage point, to 6.34 percent.
Traders sold U.S. Treasurys, sending the yield on the 10-year Treasury note up to 1.65 percent from 1.57 percent late Thursday, as demand decreased for ultra-safe investments.
Energy prices rose sharply because a cure for Europe’s debt problem would remove a big drag on global economic growth. The price of oil jumped $7.27 per barrel to $84.96. It was a gain of 9.4 percent, the biggest for oil since March 2009.
Gold gained $54, the biggest jump since June 1, to $1,604 an ounce. Copper and silver both rose about 5 percent. Copper is a key ingredient of economic expansion because of its use in electrical wiring, pipes and machinery.
The euro gained 2.3 cents against the dollar, to $1.2651.
For the year, the Dow is up 662.53 points, or 5.4 percent. The Nasdaq composite index is up 12.7 percent.
For the day, the Dow closed up 277.83 points, or 2.2 percent, at 12,880.09. The S&P 500 rose 33.12, or 2.5 percent, to 1,362.16. The Nasdaq rose 85.56, or 3 percent, to 2,935.05.
Industrial and information technology stocks rose the most of the 10 industry groups in the S&P 500. Those companies would benefit from faster growth and stronger demand from Europe, a key trading partner.