PARIS — Banking stocks led equity markets higher Monday in Europe and Asia after European leaders announced plans to inject new capital into troubled financial institutions and guarantee interbank lending, and central banks announced new measures aimed at restarting frozen credit markets.
In early afternoon trading, the FTSE 100 index in London was up 4.86 percent and the CAC-40 added 6.1 percent in Paris. The DAX in Frankfurt rose 6.9 percent.
Trading in Standard & Poor’s 500 index futures suggested Wall Street stocks would gain as much as 6 percent at the opening. The bond market was closed Monday for the Columbus Day holiday.
Deutsche Bank rose nearly 25 percent in Frankfurt, while BNP Paribas and other major French banks rose more than 6 percent.
Royal Bank of Scotland, which is raising billions of pounds worth of new equity with British government backing, rose more than 5 percent.
In Hong Kong, the Hang Seng index bounced 9.6 percent higher. The S&P/ASX 200 index in Sydney closed up 5.6 percent. Tokyo markets, which lost about a quarter of their value last week, were closed Monday for a national holiday.
In Moscow trading, the Micex index rose 4.5 percent.
“We’re extremely cautious,” Philippe Gijsels, senior equity strategist at Fortis Global Markets in Brussels, said. “This looks like the start of a typical bear-market rally.” He said measures Group of 7 countries announced over the weekend had helped banking stocks, but that the market had been due for a rally after major indexes posted some of their worst declines last week.
“To repair the market will take some time,” he said. “The problem is that the financial problem has now become a real economic problem. The damage has been done.”
“The G-7 was responding to a crisis of confidence,” David Thébault, head of derivative sales at Global Equities in Paris, said, comparing the new measures to “a defibrillator applied to a heart attack patient.” “We can see the end of the financial crisis, but at the price of an economic crisis,” he added. “But it’s better to have an economic crisis than to have the entire system endangered.”
Meeting in Paris late Sunday, officials European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks in a bid to restore confidence to the teetering financial system.
Taking their cue from a rescue plan announced last week by Britain, the European countries led by Germany and France pledged to take equity stakes in distressed banks and vowed to guarantee bank lending for periods up to five years. Both France and Germany were planning to unveil national rescue packages on Monday worth hundreds of billions of euros, officials said.
The Federal Reserve said early Monday in Washington that it would create swap lines with the Bank of England, the European Central Bank and the Swiss National Bank “to accommodate whatever quantity of U.S. dollar funding is demanded.”
The Bank of Japan, it said, will consider the introduction of similar measures.
Stocks in Sydney rose a day after Australian and New Zealand governments joined the scramble to calm markets, saying they would guarantee all bank deposits and some interbank lending.
Elsewhere, the Kospi index in South Korea rose 3.8 percent, the Straits Times index in Singapore rose 4.2 percent. In Hong Kong, financial secretary John Tsang warned of an increased risk of recession in 2009 because of the global financial crisis, and PCCW, a leading telecommunications company, on Sunday scrapped the planned partial sale of its HKT unit, citing the market upheaval. The company’s stock slumped nearly 9 percent to its lowest level since 1999.
The dollar lost ground against other major currencies. The euro rose to $1.3637 from $1.3408 late Friday in New York, while the British pound rose to $1.7151 from $1.7042. The dollar slipped to 100.58 yen from 100.68 and fell to 1.1345 Swiss francs from 1.1388.
U.S. crude oil for November delivery rose $3.96, or 3.1 percent, to $80.78 a barrel.
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