Updated Nov. 30, 2011
Stocks and the euro rallied Wednesday after six central banks acted together to make additional funds available to banks to help ease strains from Europe’s debt crisis.
The Dow Jones industrial average closed up 490.05, or 4.24%, at 12,045.70; the S&P 500 rose 51.77, or 4.33%, closing at 1,246.96; and the Nasdaq composite was up 104.83, or 4.17%, to close at 2,620.34. All numbers are preliminary.
The Stoxx Europe 600 index surged 2.7%, while the euro strengthened 0.82% to $1.3426.
The central banks of the U.S., the eurozone, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said, and agreed to make other currencies available as needed. China said earlier Wednesday it will cut the reserve requirement ratio for banks by 0.5 percentage points beginning Dec. 5, while data on U.S. business activity and the employment and housing markets topped economists’ estimates.
European finance ministers on Tuesday agreed to guarantee as much as 30% of new bond sales from troubled governments to enhance the region’s bailout fund, and to improve its ability to cap yields by buying bonds.
European heads of government will meet in Brussels on Dec. 9 to discuss the crisis.
The new interest rate central banks are offering for dollar funding is the dollar overnight index swap rate plus 50 basis points, a half percentage-point cut, and the program was extended by six months to Feb. 1, 2013, the Fed said Wednesday. The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies if needed.