Shares rally as authorities move on crisis

Global stocks and oil prices rebounded today after reassuring US economic data and hopeful signs authorities are moving forward to contain the latest outbreak in Europe's debt crisis.

Wall Street traded near break-even after opening lower as a better-than-expected report on the US services sector helped offset lingering doubts the debt crisis is over and concerns that data in Europe suggested the region is sliding into recession.

European stocks gained 2 per cent, pushed higher by banking shares, and Brent crude bounced back above $101 a barrel on news that European finance ministers are exploring ways to recapitalise the ailing sector.

"It seems politicians behind the scenes are making a determined effort to get more ahead of the curve dealing with the euro debt crisis," said Witold Bahrke, a Copenhagen-based senior strategist at PFA Pension A/S, which manages $45 billion. "Politicians may be moving closer to securing a recapitalisation of banks and a more drastic solution on Greece."

European shares rose after tumbling nearly 5 per cent the past three sessions. The benchmark S&P 500 index in the United States had fallen 10 per cent over the past six sessions.

The FTSEurofirst 300 index of top European shares was up 2.4 per cent at 909.45 points. MSCI's all-country world index rose 0.8 per cent to 274.24.

Brent crude rose $1.80 to $101.59 a barrel, while US crude was up $2.03 at $77.70 a barrel.

The Dow Jones industrial average was up 9.35 points, or 0.09 percent, at 10,818.06. The Standard & Poor's 500 Index was up 2.11 points, or 0.19 per cent, at 1,126.06. The Nasdaq Composite Index was up 2.38 points, or 0.10 per cent, at 2,407.20.

The euro rallied to trade little changed against the dollar after better-than-expected US private-sector jobs data boosted risk appetite but that advance proved fleeting.

"Slightly better employment data would signal risk preference but a lack of progress in any meaningful way on resolving Greece and the debt crisis in general is keeping risk at bay," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "A downgrade of Italy has brought everyone back to reality."

The euro was down 0.1 per cent at $1.3332. The US dollar index of major trading currencies fell 0.7 per cent to 79.053.

Focus will now switch to a meeting of the European Central Bank governing body tomorrow, where Goldman Sachs said it expects further action.

"Further liquidity measures would show that the ECB has temporarily abandoned its policy of reducing bank dependence on its funding," the broker said. "Practically, banks do not have other options, and we expect usage to increase sharply. We view this as necessary."

Agencies