European leaders' much-anticipated summit hasn't provided many details about a plan to contain the continent's debt crisis, but financial markets are giving Europe the benefit of the doubt.
Either that, or investors are just getting bored with all of this, after three months of waiting for solutions.
U.S. stocks closed broadly higher Wednesday, with the Dow Jones industrials up 162.42 points, or 1.4%, to 11,869.04. That recouped most of Tuesday’s 207-point drop.
Treasury bond yields rose, a sign that demand for bonds as a haven had eased. The 10-year T-note rose to 2.21% from 2.11% on Tuesday.
Overnight, European stock markets were little changed awaiting the summit. And the euro ended flat in New York at $1.391.
By about 1:45 p.m. PDT, the heads of state of the European Union had released a statement that called for recapitalizing troubled banks by mid-2012.
Still to be ironed out are the much tougher details about writing down Greek debt to keep the country afloat, and how much bigger the current $600-billion European rescue fund needs to be to backstop struggling member states.
U.S. stocks had opened higher, then pulled back. They got a lift at midday on a rumor that China would commit to investing in the European rescue fund to help give it more firepower, such as for insuring Eurozone countries’ bonds to make them more appealing to skittish investors.
French President Nicolas Sarkozy was said to be planning to call Chinese leader Hu Jintao to ask about a Chinese contribution.
It now appears that Eurozone leaders will end this summit by continuing to ask markets for more time to devise a package of fixes for the two-year-old debt crisis.
Never mind that this was the summit that was supposed to finally pull it all together.
The fear had been that, without concrete details, financial markets would go into another tailspin. But it isn’t looking that way.
“While people said they needed certainty out of the meeting, markets are saying that really wasn’t the case,” said Dan Katzive, currency strategist at Credit Suisse in New York. Investors seem content enough, he said, in believing that Eurozone leaders “aren’t going to allow a systemic collapse” of their banks and bond markets.
It also is helping the markets’ mood that U.S. economic data continue to point to continued expansion. For better or worse, that takes some pressure off the Europeans.
Noting the U.S. stock market’s rally since Oct. 3 -- the Dow is up 11.4% since then -- the message is that “U.S. equities want to go up, if only Europe could arrive at some conclusions,” said Alan Ruskin, currency strategist at Deutsche Bank Securities in New York.
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Photo: Polish Prime Minister Donald Tusk kisses the hand of German Chancellor Angela Merkel at the European Union summit Wednesday. Credit: Eric Feferberg / AFP/ Getty Images
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