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Stocks boosted by ECB's 3-month dollar pledge
Stocks boosted by ECB's 3-month dollar pledge, mounting hopes that Greece is safe for now
By The Associated Press

LONDON (AP) ' Stocks posted strong gains Thursday after the European Central Bank said it would provide unlimited amounts of dollars to its banking sector for three months, easing one of the concerns that has been behind the recent turbulence in financial markets of late.

Coming on top of mounting hopes that Greece will not be defaulting on its debts anytime soon, the news has helped ease concerns over the impact of Europe's debt crisis on banking stocks.

In a statement, the ECB said it had decided to launch the three-month loans in coordination with the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank.

Markets cheered the news, as fears over their access to dollar funding has been one of the reasons why banking stocks, particularly in France, have taken a battering of late. There have been concerns voiced about Societe Generale and BNP Paribas recently and the news certainly helped them to rally 8 percent and 13 percent, respectively.

"Stocks are in rally mode right now on news that the ECB is injecting dollar liquidity through the end of the year to make sure that European banks have access to funding," said Jennifer Lee, an analyst at BMO Capital Markets.

In Europe, Germany's DAX was up 3.3 percent at 5,517 while the CAC-40 in France rose 3.4 percent to 3,048. The FTSE 100 index of leading British shares was 2.2 percent higher at 5,341.

The gains weren't just confined to Europe, though. U.S. stocks eked out further gains and were heading for their fourth straight daily advance despite a mixed bag of economic data, which included higher than anticipated inflation and jobless claims figures.

The Dow Jones industrial average was up 0.9 percent at 11,346 while the broader Standard & Poor's 500 index rose a similar rate to 1,199.

The euro has been a particular beneficiary from the news, trading 0.9 percent higher at $1.3870.

"To the extent that the move eases the European banks' immediate dollar funding strains, it should be a positive for the euro and negative for the dollar, consistent with the market's initial reaction," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank.

Even before the announcement, stocks and the euro were in the ascendancy as investors appeared to be relieved that Greece wasn't being set up for a default or a possible exit from the eurozone, which could wreak havoc in markets.

Those hopes were raised by the outcome of a teleconference Wednesday between the leaders of France, Germany and Greece, who attempted to quash speculation that a Greek default was imminent and reaffirmed their belief that Greece remained an "integral part" of the eurozone.

German Chancellor Angela Merkel and French President Nicolas Sarkozy stressed to Greek Prime Minister George Papandreou that his debt-crippled country needs to honor its commitments on making savings and enacting reforms. Papandreou renewed his pledge ahead of Thursday's Greek cabinet meeting where the reform program will top the agenda.

A review of Greek financial progress from the so-called troika ' the European Commission, the European Central Bank and the International Monetary Fund ' is due to resume in coming days.

Despite the relief rally, investors are fully aware that Greece has not delivered all its promised over the past year and a half since it was granted it's first euro110 billion ($151 billion) bailout package.

Also, concerns over the passing of key anti-crisis measures across European capitals remain, especially after Austria indicated it wouldn't be able to fast-track the plans announced in July by eurozone leaders.

And investors want to see Europe come up with a more credible plan of action than the one it has pursued. A meeting of eurozone finance ministers in Poland beginning Thursday, which will also include U.S. Treasury Secretary Timothy Geithner, will be monitored in that context.

One bank not doing well at all, though, was Switzerland's UBS, which was trading around 10 percent lower after it revealed that a trader caused it an estimated loss of $2 billion. A 31-year-old man has been arrested in London.

Earlier stocks in Asia were buoyed by the Greek developments. Standouts were Japan's Nikkei 225 index, which rose 1.7 percent to 8,668.86 while South Korea's Kospi advanced 1.4 percent to 1,774.08. Hong Kong's Hang Seng ended 0.7 percent higher at 19,181.50 but China's main index in Shanghai fell 0.2 percent to 2,479.05.

Oil prices rose modestly alongside the better tone in stock markets ' benchmark oil for October delivery was up 45 cents $89.36 per barrel in electronic trading on the New York Mercantile Exchange.


Kelvin Chan in Hong Kong contributed to this report.

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