Stocks Soar Worldwide on Bank Bailout, Curb on Short Sales

Sarah Jones
Bloomberg
Friday, Sept 19, 2008

Stocks surged from London to Shanghai after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're putting together plans to halt the credit-market seizure, while U.K. and American regulators cracked down on short sellers.

Deutsche Bank AG and Credit Suisse Group climbed 15 percent while Macquarie Group Ltd., Australia's largest investment bank, soared a record 38 percent after Paulson and Bernanke proposed removing troubled assets from the balance sheets of financial companies. Barclays Plc rose 32 percent as the U.K.'s Financial Services Authority banned speculators from betting against financial shares for the rest of the year.

Europe's Dow Jones Stoxx 600 Index surged the most since data for the index began in 1987, adding 6.4 percent to 273.20 at 10:42 a.m. in London, while the U.K.'s FTSE 100 Index also posted a record advance of 8 percent. Russia's RTS Index jumped 16 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market. Futures on the Standard & Poor's 500 Index climbed 2.8 percent, and the MSCI Asia Pacific Index rebounded 4.8 percent from a three-year low. China's CSI 300 Index surged by a record 9.3 percent.

``At the start of the week, equity investors weren't just facing a loss but an absolute loss,'' said Gary Dugan, London- based chief investment offer for Europe at Merrill Lynch Global Wealth Management, which oversees $2 trillion. ``Now what they are saying is every financial institution is virtually underwritten by this proposal to drop those assets into a life boat.''

Lehman, AIG

The MSCI World Index is still down 3.2 percent this week after Lehman Brothers Holdings Inc. filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp. More than $500 billion in credit losses and writedowns at banks have pushed the global economy toward a recession.

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