Dow closes up 3%: Stocks in big leap on Europe hopes

By Greg Keller, Associated Press
Updated 2h 42m ago

NEW YORK – Stocks rose sharply in the U.S. and Europe Monday after French and German leaders promised to strengthen European banks.

The Dow Jones industrial average closed up 330.06 points, or 3%, settling at 11,433.20. Even bigger leaps were taken by the Standard & Poor's 500 index, up 3.4% to 1,194.89, and the Nasdaq composite index, up 3.5% to 2,566.05.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said they would finalize a "comprehensive response" to the debt crisis by the end of the month, including a plan to make sure banks have adequate capital.

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"The more we can put our arms around the problem with a little more detail, the better, and time frames usually help," said Michael Sansoterra, a portfolio manager at Silvant Capital Management in Atlanta.

Stock trend

Dow Jones industrial average, five trading days European stock markets rose and the euro strengthened against the dollar on the latest indication that European leaders were making progress on containing the region's debt crisis. Germany's DAX rose 3% and France's CAC-40 rose 2%.

Investors were also relieved that troubled Franco-Belgian bank Dexia would be partially nationalized. Dexia needed rescue because owns large amounts of government bonds of indebted countries like Greece and Italy.

European banks have become more reluctant to lend to each other, putting overextended banks like Dexia in danger. That prompted the European Central Bank last week to offer unlimited one-year loans to the banks through 2013 to help give them access to credit.

Investors have been worried that a default by Greece could cause the value of Greek bonds held by those banks to plunge, hurting their balance sheets. U.S. banks could also be affected if Greece goes through a messy default, since they own Greek bonds and also have close ties to European banks.

Bond trading is closed for the Columbus Day holiday.

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