Stocks rose sharply in Europe and in the US on Monday as investor sentiment were buoyed by a renewed pledge by France and Germany to come up with a plan to tackle the Euro zone debt crisis by month's end. International pressure has been building for bold steps from Europe to avert a global economic backlash.
In a move that could pressure other Euro zone governments to strengthen their banks, Franco-Belgian lender Dexia agreed to nationalize its Belgian banking division and secured state guarantees in a rescue.
The Dow Jones industrial average jumped 205.41 points, or 1.85%, to 11,308.53. The Standard & Poor's 500 Index rose 24.21 points, or 2.10%, to 1,179.67. The Nasdaq Composite Index climbed 44.89 points, or 1.81%, to 2,524.24.
The benchmark S&P 500 climbed above its 50-day moving average of 1,175.61 for the first time since late July, a level seen by analysts as a key resistance point.
Earlier in the day European stocks also increased on the renewed pledge by French president Nicholas Sarkozy and German Prime Minister Angela Merkel to address the Euro debt situation and support the region's banks.
However, mounting expectation of a wave of recapitalisation in the banking sector as well as Erste Group Bank's warning that it would make a big loss this year prompted investors to book a portion of the recent strong gains made on banking stocks.
The FTS100 was up 1.8%; the German DAX index climbed 3% and the French CAC40. The FTSEurofirst 300 index of top European shares was up 0.8 percent at 954.97 points. The benchmark index has gained nearly 9% since reaching a low last Tuesday.
The index's next resistance levels are at 978.57 points, which represents a high reached on Sept. 1, and 983.41 points, the 50% retracement of the July 22-Sept. 23 nosedive.
On Sunday from Berlin the leaders of Germany and France promised to unveil new measures to solve the Euro zone's debt crisis by the end of the month.
Merkel and Sarkozy said that their goal was to come up with a sustainable answer for Greece's woes, agree how to recapitalise European banks and present a plan for accelerating economic coordination in the euro zone by a G20 summit in Cannes on November 3-4. But they declined to reveal any details of their plan.