Rescue package spurs stocks to two-month high

Dubai: Global stocks rose to nearly two month highs yesterday after EU leaders agreed a ‘three-pronged' rescue package to contain the Eurozone's sovereign debt crisis.

World stocks measured by the MSCI All-Country World Index advanced 1.8 per cent to hit their highest intraday level since early September. In the US, the Dow Jones industrial average futures soared 202 points, and Nasdaq 100 futures jumped 48.5 points.

Earlier, London's FTSE 100 index, Frankfurt's Dax and Paris' CAC had all rallied after European leaders agreed to boost the region's bailout fund to $1 trillion (Dh3.67 trillion) in order to protect larger economies such as Italy and Spain. Private banks and insurers also accepted 50 per cent losses on Greek bonds in one of the most contentious parts of the deal.

Fundamental issue not solved

"This rescue plan does not solve the fundamental issue but temporarily removes the risk of a Greek default," said Robert McKinnon, chief investment officer at ASAS Capital.

"Global markets were exhausted from the uncertainty of the last few months but at least we have now seen some action. A lot of the details of this rescue plan still have to be worked out but it at least buys some time. There will be some volatility in the months ahead but we have moved away from the brink.

‘Too much sovereign debt'

"The real issue in the long term is there is still far too much sovereign debt and it will be difficult for economies to grow as they try to offset their deficits whilst cutting government spending."

Regional markets followed global cues with Dubai's benchmark index climbing 1.93 per cent to 1,379.95 and Abu Dhabi's bourse gaining 0.69 per cent to 2,471.67.

Markets in Qatar and Bahrain posted losses but Kuwait and Oman registered gains. Saudi Arabia's Tadawul All Share Index, the Arab world's most liquid bourse, was closed for the weekend.

Increased firepower

"Markets got what they wanted to hear, especially with the increased firepower of the European Financial Stability Facility," said Haissam Arabi, chief executive and fund manager at Gulfmena Investments.

"We saw a positive reaction across US, Asian and European equity indexes, which prompted a reaction in regional markets. It is the first time interest has returned to our markets for some time as when there has been an uptick globally over the last few months it has not necessarily registered in any big way.

"The Eurozone, which accounts for 27 per cent of the global economy, is not slowing at the pace that was initially feared and the bloc has bought some time for itself in terms of structural reform with this rescue package."