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.
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