Stocks surged on Wednesday as major central banks around the world acted jointly to add liquidity to the global financial system, sparking a rally in risk assets, such as equities and commodities.The Federal Reserve, the European Central Bank as well as the central banks of Canada, Britain, Japan and Switzerland agreed to lower the cost of existing dollar swap lines, or reducing the cost of temporary dollar loans to banks by a half percentage point.Reuters reported that financial and other economically sensitive stocks jumped after the action. Bank of America Corporation rose by 3.2 per cent to $5.23 after hitting a near by three-year low, while JPMorgan Chase and Company added 6.4 per cent to $30.39."A lot of short-term momentum players have participated in this move," a trader at Knight Capital in Jersey City, New Jersey, Peter Kenny, said, adding, "There has been quite a bit of short-term high (volume) trading going on."However, he noted, "The nature of the move higher and the degree to which it is likely to continue is really going to be showcased by how well European markets, and particularly debt markets, respond to this coordinated effort."The Dow Jones industrial average jumped by 422.58 points or 3.66 per cent, to 11,978.21. The Standard & Poors 500 Index rose by 42.65 points, or 3.57 per cent, to 1,237.84. The Nasdaq Composite Index put on 89.51 points, or 3.56 per cent, to 2,605.02.Copper rose more than five per cent to a two-week high while United States oil futures jumped nearly one per cent, helped also by a sell-off in the dollar, which followed the renewed appetite for risk.The S&P materials sector was the strongest gainer, rising by 4.5 per cent. Freeport McMoRan Copper & Gold Incorporated was up by six per cent to $38.67.The central banks actions were intended to ensure that European banks, facing a credit crunch, have enough funding amid the euro zones worsening sovereign debt crisis.The moves came on the heels of an unexpected cut in bank reserve requirements in China, intended to boost an economy running at its weakest pace since 2009.Further encouraging investors, the latest US data suggested the US economy was moving more solidly toward recovery.The US private sector added the most jobs in nearly a year in November, while business activity in the US Midwest grew faster than expected in November.Another report showed pending sales of existing US homes surged in October in its biggest monthly gain since November 2010.
Click here to read full news..
