Markets rebound as central banks move to assure investors

Turkish and world stock markets rebounded strongly on Monday after last week’s historic sell-off as governments from Europe to Australia and the US intensified efforts to stabilize the world’s financial system.

The İstanbul Stock Exchange (İMKB) closed its morning session at 29,509.24, a 3.56 percent increase over Friday’s close of 28,495.93 points. However, gains were eroded in the second session, which closed at 28,961.94, amounting to only 1.64 percent in gains. The rallying markets helped to strengthen the lira against the dollar. In mid-day trading, $1 was buying YTL 1.395.

Speaking at the 11th annual “Foreign Trade Week” in Ankara, Turkish PM Recep Tayyip Erdoğan said Turkey would unavoidably be negatively affected by the global crisis.

However, he added, "Turkey will be affected to the smallest possible extent." He went on to say: "We have rebuilt the Turkish economy. The Turkish economy sits on a strong and healthy foundation. We are in a better condition vis-à-vis our finance and banking sectors when compared to developed countries."
In Washington over the weekend, Turkish officials pledged their commitment to reform in order to fight the crisis and vowed that they would work in close cooperation with the International Monetary Fund (IMF) in drafting the 2009 budget.
Elsewhere in the world, markets sprung to life as nations expanded their efforts to save a financial system reeling from seizing credit markets and risky debt that threatened to throw the global economy into recession.
Wall Street surged in morning trading, with all major indexes posting well over 5 percent gains; the Dow Jones industrial average rose 479.08, or 5.67 percent, to 8,930.27. Broader stock indicators also jumped. The Standard and Poor's 500 index advanced 52.50, or 5.81 percent, to 951.42, and the NASDAQ composite index rose 97.43, or 5.91 percent, to 1,746.94.
In Asia, markets rocketed upwards, with Hong Kong's Hang Seng Index, which tumbled more than 7 percent Friday, gaining 1,434.33 points, or 9.69 percent, to finish at 16,231.20. Australian and Singaporean indices jumped more than 5 percent, while South Korean and Chinese benchmarks added around 3.7 percent.
By mid-day Monday trading, Germany's benchmark index DAX jumped 6.44 percent to 4,836.88 and France's CAC40 was up 6.47 percent at 3,382.01, while Britain's FTSE100 rose 4.82 percent to 4,121.73.
European governments hurried Monday to calculate how many hundreds of billions of euros they would spend on an unprecedented 15-nation plan to save banks and ease markets.
On Monday the German cabinet approved a banking rescue package worth up to 500 billion euros ($679.3 billion), taking a sector-wide approach after less comprehensive steps failed to calm markets. The package included up to 400 billion euros in bank guarantees and as much as 100 billion euros in state funds, a government paper showed. French President Nicolas Sarkozy said on Monday his government would provide up to 360 billion euros ($491 billion) to help banks stay afloat through the financial crisis. France's Le Monde daily estimated the total European burden at a staggering 1.3 trillion euros ($1.77 trillion).
In Britain, three of the country's largest banks -- Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC -- announced plans to take up to 37 billion pounds (US$63 billion) of government money to boost their balance sheets.
In Europe's most unified response yet to the financial crisis, leaders of the 15 countries that use the euro currency agreed Sunday that individual governments would guarantee bank refinancing until the end of next year, rescue important failing banks through emergency cash injections and take other swift measures to encourage banks to lend to each other again. Also helping markets was a joint move by the US Federal Reserve, the European Central Bank and the Swiss National Bank to provide unlimited short-term credit in US dollars to financial institutions. The Bank of Japan said it was considering similar measures.
As added evidence of the growing consensus that is forming around the notion of a globally coordinated strategy, UK officials called on Monday for the creation of a new Bretton Woods conference of international leaders to work toward creating "new financial architecture" to manage the global economic crisis. IMF Managing Director Dominique Strauss-Kahn said individual states should intervene when necessary according to their own specific needs, but it was important that any intervention should be "massive."