U.S. Stocks Soar on GDP Report, Europe Debt Deal
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German Chancellor Angela Merkel shakes hands with Czech Prime Minister Petr Necasat at an EU summit in Brussels, Oct. 26, 2011, while France President Nicolas Sarkozy looks on. (Geert Vanden Wijngaert/AP Photo)
Stocks soared today after European leaders announced a deal to handle Greece’s debt, pushing aside a cloud that has hung over world financial markets most of the year.
At the end of the day, the Dow Jones industrial average increased about 2.9 percent to 12,209 in part boosted by a positive GDP report. The S&P 500 had its biggest monthly rally since 1974, according to Bloomberg, increasing 3.4 percent to 1,285.
The German Dax rose 5.3 percent, and France’s CAC surged 6 percent. Oil prices rose above $94 per barrel and the euro gained strongly, easing worries that the currency would fall apart without a debt deal.
European leaders clinched a deal today that is hoped will end the two-year debt crisis, agreeing after a night of tense negotiations to have banks write down a 50 percent slice of Greece’s debts and to set up a $1.4 trillion rescue fund for other ailing economies in the region, including Italy, Spain and Portugal. Many details of the pact have yet to be worked out.
“We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis,” French President Nicolas Sarkozy told reporters after the meeting ended early today. “Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide.”
After months of dawdling and disagreement, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling, the Associated Press reported.
The strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece’s debts, a shoring up of the continent’s banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a euro 1 trillion ($1.4 trillion) firewall to prevent larger economies such as Italy and Spain from being dragged into the crisis. That European Financial Stability Facility will grow to four or five times its current size.
Greece was the sticking point in the talks, with Europeans facing a tough choice: Bail out the country, whose debt had soared to 180 percent of its GDP, or allow it to default on its euro-based bonds, leading to a likely collapse of the currency shared by 17 nations. The plan calls for bringing down Greece’s debt to 120 percent of its GDP. By comparison, the U.S. national debt is 84 percent of GDP, Germany’s is 74 percent and France’s is 87 percent.
Countries that joined the euro zone in the late 1990s had to agree to spending and borrowing measures common to all their economies. But there was no effective way to tell which countries were cheating — spending more money off the books and borrowing from banks around the world in euros, then not reporting those sums. The recession that began with the US financial crisis in 2008 quickly spread to Europe, causing tax receipts to fall and governments to go into deep deficits.
Greek leaders exposed a series of cover-ups in their budgets that led to severe austerity measure, culminating with rioting and unrest as well as the eurozone bailout.
The Associated Press contributed to this report.
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Posted by: deanbob | October 27, 2011, 7:26 am 7:26 am
What? Nothing to do with this Administration’s wildly successful fiscal politcies? Can’t be.
Posted by: newcountryman | October 27, 2011, 7:45 am 7:45 am
NEWCOUNTRYMAN: But quite a lot to do with the previous Administration’s wildly unsuccessful fiscal policies as they were the catalyst for the worldwide economic collapse in the first place. People in glass houses …
Posted by: JOE HILL | October 27, 2011, 8:01 am 8:01 am
Greece’s debt crisis is Bush’s fault…got it. There’s no fixing stupid.
Posted by: newcountryman | October 27, 2011, 8:20 am 8:20 am
Translation: Wall Street gets richer and gas prices are set to go up again. Yeah, great news for the 99 percenters…………
Posted by: Searambler | October 27, 2011, 8:25 am 8:25 am
Obama’s stimulus money finally kicking and spreading economic recovery throughout the world. Nice going Mr. President. Thanks for fixing all the broken wheels. That and all the dead terrorists mean you are headed for four more years, sir. And please no flat tax bombs for the middle class as we are still crawling out of the rubble of the last catastrophe wrought by wall street and the government they corrupt.
Posted by: sameagain | October 27, 2011, 8:32 am 8:32 am
From Wikipedia; “Greece’s main industries are tourism, shipping, industrial products, food and tobacco processing, textiles, chemicals, metal products, mining and petroleum. Greece’s GDP growth has also, as an average, since the early 1990s been higher than the EU average. However, the Greek economy also faces significant problems, including rapidly rising unemployment levels, an inefficient public sector bureaucracy, tax evasion, corruption and low global competitiveness.” I text searched “Bush”. Nope, no Bush.
Posted by: newcountryman | October 27, 2011, 8:32 am 8:32 am
Pretty good news I’d say for this 53 percenter….
Posted by: newcountryman | October 27, 2011, 8:33 am 8:33 am
“Nice going Mr. President. Thanks for fixing all the broken wheels.” Pretty darn funny!
Posted by: newcountryman | October 27, 2011, 8:41 am 8:41 am
The deal gives Europe a plan to tout at next week’s key Group of 20 meeting in Cannes, France, where countries including China and the United States have been hoping to hear a report of major progress. The EU bailout of Greece has nothing to do with the US stimulus experiment.
Posted by: newcountryman | October 27, 2011, 8:47 am 8:47 am
They didn’t fix anything and the financial world is all dumb and happy again??? All they did was put a whole bunch of money aside and basically ok Greece, you don’t have to repay your debt. And then they put a whole bunch more money aside for other countries to not have to repay there debts if they can’t afford it. This fixes what? When all this money runs out then where will they be? All I know is I want to be an economically troubled country in Europe. It’s like being on welfare in the US.
Posted by: pgdion | October 27, 2011, 8:51 am 8:51 am
Maybe it will shame the Republicans into doing something about our deficits. But Voodoo Economics is hard to part with, especially when it has won so many elections for them.
Posted by: Jim1348 | October 27, 2011, 8:52 am 8:52 am
What a huge relief! The European debts crisis is over. Now, everyone can relax and return to making
lots of money on speculation in the markets. And 2.5% growth in the U.S.
So many good signs for prosperity for all. Just cannot wait for it all to trickle down.
Gosh, this is such exciting news. Christmas has arrived two months early.
All is right with the world.
America no longer needs to be concerned about its fiscal/economic domestic issues, because now
the Europeans have finally righted the myriad of economic complexities, that were endangering
our banks and financial systems.
Thank goodness, everything is going to be O.K.
Not.
Posted by: Christopher Popham Smith | October 27, 2011, 9:31 am 9:31 am
I thought the same thing that pdion put in his post when I heard this on the news. Banks are going to eat a 50% loss on bad loans to Greece and yet are ponying up even more money to loan countries in the same situation? Why is this such a relief to everyone?
Posted by: Publius | October 27, 2011, 9:53 am 9:53 am
“Now, everyone can relax and return to making
lots of money on speculation in the markets. And 2.5% growth in the U.S.
So many good signs for prosperity for all. Just cannot wait for it all to trickle down.
Gosh, this is such exciting news. Christmas has arrived two months early.
All is right with the world.”………………… I wouldn’t go that far. Obama is still around.
Posted by: newcountryman | October 27, 2011, 9:58 am 9:58 am
After someone with clout sells stocks when they hit highs from this news, someone like Merrill Lynch, which as paid over $165,000,000 in fines even during the G W Bush years for misleading small investors for the benefit of big ones, will start spreading the idea that this deal doesn’t do enough in order to drive stocks back down so the cash from sales can buy more shares. There really hasn’t been any reason to believe that Greece, whose economy is smaller than the State of Maryland’s, was going to drive the world to ruin or that Europe was going to let itself fall apart due to little Greece. But the fearmongers have been playing their games. That’s ok with me: my reinvested dividends buy more shares on the dips.
Posted by: The_Mick | October 27, 2011, 9:59 am 9:59 am
When Bush/Paulson gave out U.S. taxpayer money, it was proof they were in Wall Street’s back pocket. When Obama/Geithner do it, they’re rescuing the “world’s” economy. Interesting.
Posted by: newcountryman | October 27, 2011, 10:08 am 10:08 am
The_Mick (9:59 AM); I feel about the same, but since you receive “dividends” you must be one of those evil one percenters……and are not paying yur fair share.
Posted by: newcountryman | October 27, 2011, 10:11 am 10:11 am
So basically never invest in a muni bond, because you never know when people will just throw it out the window and say there is no debt.
Posted by: snewsom2997 | October 27, 2011, 10:18 am 10:18 am
newcountryman: “When Obama/Geithner do it, they’re rescuing the “world’s” economy. Interesting.” — Yes, politically minded people always blame the opposition more. You do it too. So what’s new?
Posted by: jock59801 | October 27, 2011, 11:05 am 11:05 am
Jock59801 (11:05 AM); Just pointing out the double standard in case some of the “bots” actually believe what they’re saying. I believe some of them actually do. That’s what’s bothersome. And Obama plays it to the hilt.
Posted by: newcountryman | October 27, 2011, 12:19 pm 12:19 pm
The world is in heaven, and the price of oil shoots of towards the moon, and our prices go right aling with it
Posted by: more disappointment | October 27, 2011, 12:57 pm 12:57 pm
Gippy (2:12 PM); I don’t ever listen to Limbaugh. I don’t agree with his positions. I do listen to Fox news sometimes for which I always seem to get criticized by bots.
Posted by: newcountryman | October 27, 2011, 2:44 pm 2:44 pm
BTW, It’s you’re not your. A contraction of you are.
Posted by: newcountryman | October 27, 2011, 2:48 pm 2:48 pm
newmancountry – what wuod i du without ewe?
Posted by: gippy | October 27, 2011, 3:02 pm 3:02 pm
Gippy (3:02 PM), Gee I dunno. Watch taped episodes of the Ed show or Rachel Madcow on MSNBC?
Posted by: newcountryman | October 27, 2011, 3:15 pm 3:15 pm
Unemployment is stuck at around 9 percent. Unemployment claims are stuck at around 400,000. Consumer sentiment is at 2009 levels. Durable goods orders are flat (manf. are not replenishing inv.). Most retailers are keeping holiday hiring at 2010 levels which was low. The economy grew but at an anemic 2.5% (we need growth to be sustained at 6% or higher to get out of this malaise). Business polled across the country have stated they are not planning to hire. The housing market still hasn’t hit bottom. So, tell me again how Obama’s policies are getting us out of this economic malaise? I think it’s a bit premature to break out the champagne just yet. Hence the title that stocks responded to EUROPEAN DEBT DEAL not US recovery.
Posted by: TruthBeTold | October 27, 2011, 3:39 pm 3:39 pm
When the market went on a downward slide (even if it was one day), I saw a whole bunch of caustic “Thanks Obama” posts and now that it’s up (even if it is one day) those people are now either conspicuously absent or they are simply content to be pessimistic.
Posted by: mijoje1 | October 27, 2011, 4:31 pm 4:31 pm
Newcountryman- Do you just cut and paste,” It’s Obama’s Fault” ? You NEVER have a good word to say for him, and , curiously, you never speak badly of Bush. You can’t change facts, by spending trillions looking for WMD’s, deliberately pushing up the price of Oil, and by deregulating Wall Street Overseers, Bush and the GOP destroyed our economy as well as any stock markets attached to ours.
Posted by: arryandan | October 27, 2011, 5:00 pm 5:00 pm
“So, tell me again how Obama’s policies are getting us out of this economic malaise?” — I don’t think anybody is saying they are. The question is whether anything would be better with someone else. McCain? Perry? LOL
Posted by: jock59801 | October 27, 2011, 5:22 pm 5:22 pm
Arryandan (5:00 PM); No, I think Obama’s work with veterans is admirable. The way he takes credit for just about everything else is political BS. And as a politician he’s a vote scavenger. Half of what I post is simply not allowing his followers to get away with misattributing or giving him credit for things he has little or nothing to do with. Bush? His main problem was he didn’t act on problems when the writing was on the wall and was being warned. Which is just as bad.
Posted by: newcountryman | October 27, 2011, 5:26 pm 5:26 pm
I also think people hate Bush so much they let Obama slide for obvious shortcomings.
Posted by: newcountryman | October 27, 2011, 5:28 pm 5:28 pm
Obama has a lock on winning 2012. The GOP has such pathetic candidates–they are a joke! They would get no coverage at all except on Fox Right Wing News if the economy were not in the tank because of the ubiqitous housing crisis. This is the last hurrah for the right wing kooks. There are about 3 million of them who watch FOX RWN but that’s a drop in the bucket considering the 310 million people in the US. But…Fox RWN can continue making money off these suckers who are in their own little world.
Posted by: usa8888 | October 27, 2011, 6:33 pm 6:33 pm
Why not put the real truth to this deal? The truth of the deal is that the US tax payers are bailing them out and that all they are doing is buying time with borrowed money. The reality is that Europeans will destroy a bunch of bondholders who financed the Greek debt. They will then borrow 1/2 to 3/4 trillion Euros to prevent this from triggering a bankruptcy cascade. Then 15-35% of this bill will then be sent to the US Treasurey and this loss will be placed on US tax payers. Too bad we can never get the real truth from mainstream media outlets.
Posted by: J Herrera | October 27, 2011, 6:51 pm 6:51 pm
The rise is temporary. The PIIGS are not out of the woods yet.
Posted by: jonnie | October 27, 2011, 9:08 pm 9:08 pm
So where is the economic crisis, is it manmade?
Posted by: chris elens | October 29, 2011, 7:55 am 7:55 am
Can you please email me the code for this script or please tell me in detail about this script?
Posted by: Wendi Edgcomb | February 10, 2012, 4:17 pm 4:17 pm
I appreciate the informative views he expressed on this blog, and I will miss him from the Euroblogosphere.
Posted by: la martina polo | April 2, 2012, 2:44 pm 2:44 pm