Europe will be saved: That's the message that investors across the world took to heart after European Central Bank policymakers said they were working to strengthen the region’s rescue fund to alleviate a crisis.
Also supporting sentiment was a statement by Greek Finance Minister Evangelos Venizelos that senior debt inspectors would return to Athens this week and Greece would receive the next 8-billion euro instalment of aid in time to avoid bankruptcy next month. A source close to the team said they would probably return on Wednesday to complete a review of compliance with the bailout programme.
Well, that was easy. Britain's FTSE 100 rose 2.7 per cent, France's CAC 40 surged 3.9 per cent, and Germany's DAX gained 3.9 per cent as well. Japan's Nikkei 225 rose 2.8 per cent, while Hong Kong's Hang Seng jumped 4.2 per cent.
Dow futures rose 148 points, or 1.4 per cent, to 11,120, while S&P 500 futures gained 15.7 points, or 1.4 per cent, trading at 1,174.10.
Chancellor Angela Merkel said that Germany would do what it can to help Greece regain markets' confidence. Ms. Merkel is due to meet Greek Prime Minister George Papandreou later on Tuesday.
Market chatter has it that the euro zone may let Greece default on 50 per cent of its debts, and massively expand its rescue fund and recapitalize banks.
Greek lawmakers are expected to approve a deeply unpopular property tax on Tuesday, despite growing anger sweeping the austerity-hit nation. The vote is an important first test of the government’s ability to push through a new wave of belt-tightening announced last week to persuade the International Monetary Fund and the European Union that Athens deserves its lifeline loan.
Markets are also awaiting a policy meeting of the European Central Bank next week, with ECB officials saying on Monday they were keeping their options for a rate cut open. There were signals the bank could start offering 12-month, limit-free loans to banks again.
The main focus later in the U.S. will be consumer confidence figures for September.
Commodities markets bounced back as investors picked up oil and metals, which suffered one of the biggest sell-offs since the 2008 financial crisis during the past week.
The Canadian dollar rose to 97.87 U.S. cents.
The U.S. dollar’s decline also helped commodities. Gold rose for the first time in five sessions, rallying 2.6 per cent to $1,669.39 a troy ounce.
Benchmark oil for November delivery rose $2.44 to $82.68 per barrel in electronic trading on the New York Mercantile Exchange.
Benchmark copper on the London Metal Exchange rose nearly 2 per cent to $7,403 a tonne. Three-month tin jumped 5 per cent.