European and U.S. markets brushed aside earlier losses in Asia and weaker than expected U.S. jobs data to post healthy gains Friday.
Investors were eager to see the government’s plan to buy up the bad mortgage-related debt on US banks’ balance sheets passed by the House. Earlier this week, the Senate backed the proposal by a large majority, giving a lifeline to the package spectacularly rejected on Monday by the House.
In a second vote, the U.S. House of Representative finally backed the government’s $700 billion bank bailout later Friday.
At the close, Britain’s FTSE 100 index was up 109.91 points, or 2.2 percent at 4,980.25, while Germany’s DAX was 136.40, or 2.4 percent higher at 5,797.03. The CAC 40 in France performed the best of all up 117.47 points, or 3.0 percent, at 4,080.75.
Even though the pressures in stock markets appear to have settled down for the moment, more stress showed in money markets, particularly in Europe, where the euro interbank offered rate, or Euribor, hit a new all-time high of 5.33 percent. Meanwhile, the key London interbank bank offered rate, or Libor, also climbed to a nine-month high of 4.33 percent.
Analysts and officials say that the U.S. bailout plan will not be enough in itself to free up money market lending and that further co-ordinated action by policy-makers across the globe will be required. A meeting of EU leaders this weekend in Paris and next week’s meeting of officials from the G7 countries may offer policy-makers an opportunity to draw up such plans.
With money market rates elevated there is a growing consensus interest rate cuts may be on the way from the U.S. Federal Reserve, the European Central Bank and the Bank of England.
The key economic event Friday was the US non-farm payrolls report for September. The Labor Department reported that employers slashed payrolls by 159,000 in September, the most in more than five years, piling on the pressure on lawmakers to pass the bailout plan.
“They make it more likely that the House will approve the rescue plan tonight, and they may also trigger another Fed rate cut,” said Dr. Harm Bandholz, economist at UniCredit.
Earlier, virtually all Asian markets were in the red in the wake of Thursday’s losses on Wall Street. Japan’s benchmark Nikkei 225 stock average lost 1.9 percent of its value, closing at 10,938.14, its lowest since May 18, 2005.
Japanese automakers had another bad day dropping for the second day running Friday after the industry reported September sales plunged in the U.S. — their biggest overseas market.
Shares of Toyota Motor Corp. fell 5.3 percent after it said Wednesday that U.S. monthly sales fell 32 percent. Nissan Motor Co. tumbled 7 percent and Honda Motor Co. fell 5.5 percent.
Meanwhile, Hong Kong’s Hang Seng index slid 2.9 percent to 17,682.40, while key indices in Australia, Singapore, India, Malaysia and Thailand also fell. Only Taiwan bucked the regional trend and edged higher.
Markets in mainland China, South Korea and Indonesia were closed for national holidays.
Elsewhere, the dollar edged up to 105.03 yen from 104.97 late Thursday in New York. The euro climbed to $1.3819 after dipping as low as $1.3701 in mornig trading.