Bank president's vow lifts stocks in U.S. and Europe

By Pallavi Gogoi

Associated Press

Published: Thursday, July 26 2012 7:23 p.m. MDT

Traders gather at a post on the floor of the New York Stock Exchange during the IPO of Northern Tier Energy, Thursday, July 26, 2012. U.S. stocks soared at the opening bell after the president of the European Central Bank vowed to do what it takes to preserve the continent's monetary union. (AP Photo/Richard Drew)

Associated Press

NEW YORK — It was the buy signal that markets were waiting for.

When European Central Bank president Mario Draghi vowed to "do whatever it takes" to keep the continent's monetary union intact, stocks were off to races in the U.S. and Europe.

The Dow Jones industrial average on Thursday jumped 212 points, or 1.7 percent, to 12,888 following big gains in European markets. Benchmark stock indexes in Spain and Italy surged 6 percent and 4 percent in France.

Draghi's comments at an investor conference at the Olympics raised hopes that Europe's central bank might intervene to bring down the high borrowing costs for struggling European countries such as Spain and Italy.

After insisting for months that it was up to European governments to restore confidence in the currency shared by 17 nations there, Draghi pledged that "the ECB is ready to do whatever it takes to preserve the euro."

That commitment gave a big boost to global markets. "The No. 1 problem in the world now is Europe's finances," said John Fox, director of research at Fenimore Asset Management. "When the head of the ECB comes out and says he's willing to do anything, that's code for 'We are going to agree to resolve this issue.' "

In other signs that investors were becoming more confident that Europe's financial crisis would not spin out of control, borrowing costs for Spain and Italy fell sharply, the euro surged a penny to $1.23 against the dollar and the yield on the 10-year Treasury note rose to 1.43 percent from 1.40 percent late Wednesday. Investors tend to sell low-risk assets like Treasurys when they're less fearful about global markets and the economy.

The broader the Standard & Poor's 500 index rose for the first time in five days. It rose 22.13 points, or 1.7 percent, to 1,360.02.

The Nasdaq composite index rose 39.01 points, or 1.4 percent, to 2,893.25.

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