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Market euphoria greets Citigroup rescue

Text by AFP

Latest update : 2008-11-24

Shares on Wall Street jumped up at the opening Monday, buoyed by the government's rescue of battered banking giant Citigroup. In Europe, most markets raced up more than 6% amid talk of fresh US measures to bolster the economy.

Wall Street shares raced higher Monday after a huge weekend rescue for struggling banking giant Citigroup prompted a rush into beaten-down stocks.
At 1542 GMT, the Dow Jones Industrial Average jumped 292.95 points (3.64 percent) to 8,339.37 while the Nasdaq composite rallied 54.11 points (3.91 percent) to 1,438.46.
The Standard & Poor's 500 index advanced 31.63 points (3.95 percent) to 831.66.
Buyers rushed in after another dreadful week for Wall Street in which the broad market fell more than eight percent and touched an 11-year low.
The catalyst came in the US government rescue of Citigroup, which got fresh capital and a guarantee for its troubled mortgage assets, averting a possible collapse.
The government agreed to back some 300 billion dollars in troubled mortgage assets and inject another 20 billion dollars in capital, boosting its stake in one of the biggest banks.
"The failure of Citi, with its two trillion dollar balance sheet, would have been absolutely catastrophic to the global banking system," said Fred Dickson at DA Davidson & Co.
"The government is making sure Citi doesn't fail ... At a minimum, the Fed's action should trigger a near-term short-covering rally in the big banks."
Paul Nolte at Hinsdale Investments said the market was ripe for a rebound after the bruising losses of the past few weeks.
"After reviewing the carnage of the past months, we can now say that stocks are priced to provide the best returns that we have seen but for only a couple times over the past 80-plus years," he said.
"What is being missed by investors wallowing in the current heap of bad news is that the future (and yes there will be one!) does look bright given the very low current valuations. The balance sheets of many companies remains fairly strong, enough to weather the current downturn."
Citigroup shares, which lost 60 percent last week, surged 57 percent to 5.93 dollars after news of the rescue plan, energizing buying in the financial sector.
Bank of America leapt 11.6 percent to 12.80 dollars, JPMorgan Chase added 4.9 percent to 23.84, Goldman Sachs climbed 11.5 percent to 59.42 and Morgan Stanley vaulted 17.4 percent to 11.80.
General Motors meanwhile lost 2.6 percent to 2.98 dollars as worries grew about its future in view of a delay on a government rescue for the automaker and the Wall Street Journal reported bankruptcy was now being considered.
Bonds fell after last week's huge rally. The yield on the 10-year US Treasury bond increased to 3.293 percent from 3.167 percent Friday while that on the 30-year bond rose to 3.767 percent against 3.663 percent. Bond yields and prices move in opposite directions.

The London stock market surged by almost eight percent in late trading on Monday ahead of the planned announcement of a British government stimulus package.
London's FTSE 100 index of leading shares jumped 7.87 percent to 4,078.48 points. 

French share prices soared 5.46 percent to 3,038.47 points in late-day trade Monday as investors took heart from the prospects for substantial new US and British economic stimulus plans.
French shares lost 3.33 percent on Friday.

Date created : 2008-11-24