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 fixed4.19%4.26%
15 yr fixed3.23%3.27%
5/1 ARM3.34%3.45%
30 yr refi4.17%4.23%
15 yr refi3.21%3.25%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,982.59 22.02 0.13%
Nasdaq 4,444.91 -4.65 -0.10%
S&P 500 1,978.91 0.57 0.03%
Treasuries 2.49 0.02 0.89%
Data as of 9:47pm ET
Company Price Change % Change
Apple Inc 99.02 1.99 2.05%
Facebook Inc 74.92 -0.06 -0.08%
Bank of America Corp... 15.50 -0.09 -0.58%
Dollar Tree Inc 54.87 -0.08 -0.15%
Family Dollar Stores... 75.74 15.08 24.86%
Data as of 4:03pm ET

Sections

Herbalife shares tumble after the maker of nutritional supplements reports earnings that fall short of analysts' estimates. More

New annual report from U.S. government shows the long-term prognosis for Medicare has improved thanks to slower health spending, while the outlook for Social Security remains unchanged. More

Online dating site OkCupid found its users were more likely to have conversations when it told them they were more compatible than in reality. More

Actor-founded This Bar Saves Lives had Hollywood connections, but learned Start-Up 101 the hard way. More

Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More

Market indexes 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. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.