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Sun, Oct 19, 2008 - Page 10 News List

EUROPE: Europe stocks rise on government-led bank rescue plans

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European stocks rose last week, sending the Dow Jones Stoxx 600 Index to its biggest gain since March last year, after governments announced bank rescue packages to shore up the financial system and restore investor confidence.

Credit Suisse Group AG posted a record weekly advance and Barclays Plc climbed 6.5 percent as European leaders agreed to guarantee new bank debt and money-market rates declined. Ericsson AB rallied 12 percent as its mobile-phone venture with Sony Corp reported a smaller-than-estimated loss.

The Stoxx 600 added 4.5 percent to 214.27. The gauge jumped 13 percent in the first two days last week, the biggest two-day surge on record, before posting the steepest two-day tumble since 1987 after reports showed a drop in U.S. retail sales and the highest UK unemployment since November 2006.

The benchmark index for European equities is down 41 percent this year as credit losses and asset writedowns at financial firms worldwide reached US$660 billion, pushing the global economy toward a recession.

“The government measures were a huge progress to win back trust,” said Erwin Brunner, who oversees the equivalent of US$442 million as executive officer at BrunnerInvest AG in Zurich. “The slump in the US remains the dominant factor and Europe follows. I can’t see how the economy can grow given the financial problems, we will go into a recession.”

The US said it would invest US$250 billion in the nation’s banks and urged lenders to use the funds to spur economic growth. The injection came after France, Germany, Spain, the Netherlands and Austria pledged 1.3 trillion euros (US$1.8 trillion) to guarantee bank loans and take stakes in lenders.

National benchmark indexes rose in 11 of the 18 western European markets. Germany’s DAX Index increased 5.2 percent. France’s CAC 40 advanced 4.8 percent, while the UK’s FTSE 100 added 3.3 percent.

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