EU's €940bn plan to tame crisis boosts stocks

Dow Jones: 11,541.78 (+37.16) Nasdaq: 2,598.62 (–5.42) SP 500: 1,215.39 (+5.51)US STOCKS and the euro rose yesterday as European governments discussed deploying $1.3 trillion (€940 billion) in funds to tame the sovereign debt crisis and France and Germany asked officials to agree on the crisis plans by October 26th.

The euro gained 0.2 per cent to $1.3786, rebounding from a 0.8 per cent slide, and 10-year Treasury yields rose two basis points to 2.19 per cent.

The Dow Jones industrial average ended up 37.16 points, or 0.32 per cent, at 11,541.78.

The Standard Poor’s 500 Index rose 5.51 points, or 0.46 per cent, at 1,215.39.

The Nasdaq Composite Index was down 5.42 points, or 0.21 per cent, at 2,598.62.

Riskier assets rebounded as two people familiar with the matter said Europe may combine the temporary and permanent rescue funds to unleash as much as €940 billion to fight the crisis.

German chancellor Angela Merkel and French president Nicolas Sarkozy said in a joint statement they want euro-region leaders to agree on a “comprehensive and ambitious” plan.

“The main thing is – can we get to the point where we actually have a constructive resolution in Europe,” Brian Barish, Denver-based president of Cambiar Investors, said.

“The market is hypersensitive as to whether or not a plan will emerge that will stabilize Europe,” he said.

Banks in the Stoxx Europe 600 Index slid 4 per cent as a group and yields on 10-year Italian bonds topped 6 per cent for the first time in more than two months, underscoring the urgency of the need for a solution.

After the closing bell, Microsoft shares fell 0.5 per cent to $26.87 following quarterly results.

During regular trading Microsoft finished at $27.04, down 0.3 per cent.

Ingersoll Rand posted lower quarterly earnings, and its fourth-quarter profit forecast fell short of some Wall Street estimates, due to depressed housing and consumer markets, sending shares down 7.9 per cent to $27.38.

Polycom fell more than 25 per cent to $16.33 and weighed on the Nasdaq after the video conferencing company reported quarterly revenue well below market expectations. – (Bloom-berg/Reuters)