Futures rally following decisive call in Europe
NEW YORK (AP) — Stock futures rebounded sharply after European leaders appeared to take decisive action on debt issues that have threatened to spread across the continent.
Markets had grown increasingly dubious about the ability or willingness of the European Union to institute broad measures that would help to avert a broadening crisis. However, leaders meeting in Brussels Friday revealed a new plan to send EU bailout funds directly to struggling banks and to ease austerity measures for the most troubled nations.
Dow Jones industrial average futures jumped 195 points to 12,721. Standard & Poor's 500 futures rose 26.6 points to 1,349 and Nasdaq futures added 50.25 points to 2,578.
The news out of Brussels also sent energy prices soaring on the belief that a potential panacea for Europe's problems will eventually lead to growth. Benchmark oil jumped more than 3 percent, or $2.70, to $80.39 a barrel in electronic trading on the New York Mercantile Exchange, a day after hitting eight-month lows.
The two-day European summit in Brussels is the 19th meeting for EU leaders since the debt crisis emerged and leaders have repeatedly clashed over how best to address it.
European Council President Herman Van Rompuy called Friday's agreement a "breakthrough."
Consensus in Europe was reached as borrowing rates in Spain — where unemployment is approaching 25 percent — and Italy hit unsustainable levels. The fear was that the weaker economies of Europe would drag the entire continent into recession, or worse.
Stocks around the world surged Friday, with markets in countries on the front line of the crisis doing particularly well. Italy's FTSE MIB and Spain's IBEX indexes each rose 3 percent.
Perhaps more importantly, the yield on Spain's 10-year bond dropped by 0.32 percentage points to 6.58 percent. Italy's was down by 0.14 percentage points to 5.94 percent. Both countries have seen their rates edge toward the 7 percent level which is seen as unsustainable over the long term.
The developments overshadowed more unappetizing signals about the U.S. economy.
Americans were more leery of spending in May as they saw dismal gains in income, suggesting that a slow jobs recovery is sowing doubts about an economic rebound at home.
The Commerce Department reported Friday that consumer spending showed no gain in May, the weakest figure since spending was unchanged in November. Income growth edged up 0.2 percent, matching the modest April increase.
