Europe and U.S. step up rescue efforts



NEW YORK (CNNMoney.com) -- As world markets remained on edge, European Union leaders reached agreement Sunday on a massive show of force to support struggling countries in the region.

Separately, the U.S. Federal Reserve joined central banks in Canada and Europe in re-establishing a program meant to improve lending conditions. The Fed said Monday that it had struck a similar arrangement with the Bank of Japan.

The European rescue, valued at more than $900 billion (720 billion euros), has three main components. The biggest provision -- at nearly $570 billion (440 billion euros) -- takes the form of government-backed loans to shore up confidence in shaky credit markets.

The action puts the weight of the economies of Germany and France behind weaker members of the European Union, such as Greece, Portugal and Spain.

A second measure is the expansion of a $77 billion (60 billion euros) stabilization fund. Finally, the International Monetary Fund said it would contribute $284 billion (220 billion euros).

Stocks around the world surged on the plan. U.S. stocks soared Monday, with the Dow Jones industrial average up more than 400 points. In Europe, the CAC 40 in France closed 9.6% higher. Britain's FTSE 100 and Germany's DAX were also sharply higher, closing with gains of more than 5%.

In Asia, stocks ended the session higher. Japan's benchmark Nikkei index gained 1.6% higher Monday and the Hang Seng in Hong Kong rallied 2.3%.

The package is the strongest signal yet that European leaders are committed to acting together to support weak economies and protect their common currency, the euro.

In the United States, the Federal Reserve's action -- called a temporary U.S. dollar liquidity swap -- is a sign that the central bank will continue to support credit markets. The Fed has been slowly pulling back on its efforts to boost lending, most of which were begun in the wake of the collapse of Lehman Brothers in 2008.

The goal of the Fed's latest program is to help stabilize financial markets by providing dollars to foreign banks that need the U.S. currency to transact business. The concern is that there will not be enough dollars overseas to meet demand, which could unsettle credit markets.

The swaps program will begin this week and is scheduled to continue through January 2011.

The spark for the latest action was the concern that the recent bailout package for Greece might not be sufficient, and that problems could spread to other European countries as investors grew concerned about high debt levels.

The value of the euro has slid in recent weeks, and many economists have begun to question its future.

European fears have weighed on stocks -- since peaking in late April, the Dow has lost 7.4% and volatility has soared.

- A CNN Wire report was used in compiling this article.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.01%4.03%
15 yr fixed3.12%2.97%
5/1 ARM3.11%2.99%
30 yr refi4.04%4.09%
15 yr refi3.15%3.05%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 12:35pm ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of Dec 19

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.