Global stock markets roared higher on Friday after news of a possible U.S. government plan to rescue banks from toxic mortgage debt raised a collective sense of hope amid the world's worst financial crisis in decades.I don't mind pumping money into the economy, that is what central banks are for, in part, but bailing out companies is not the proper course of action.
Europe exchanges, which had spent nearly all of this week drowning in declines responded with ferocity to the possible plan, surging as battered bank stocks rebounding along with them.
The news of a likely U.S. lifeline, along with new changes to short-selling in the U.S., Britain and Ireland, also helped push markets higher, analysts said.
Early Friday, the U.S. Securities and Exchange Commission took the dramatic step of temporarily banning the routine practice of betting against company stocks, announcing the move on its Web site.
The commission said it was acting in concert with Britain's Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence.
"The short-term changes to short selling are certainly giving markets and regulators room to breathe," said Keith Bowman, equity analyst Hargreaves Lansdown Stockbrokers. "But there are going to be a significant number of hurdles to overcome for this temporary measure to prove useful at solving the fundamental problems over the long term."
Another factor were moves by the European Central Bank, Swiss National Bank and Bank of England to offer up more cash Friday. The three banks put a combined $90 billion into money markets in a lockstep move.
Friday, September 19, 2008
Bailouts may continue for the biggest financial companies for the U.S. has apparently become addicted to government intervention.