Traders embark on buying spree

TRADERS went on a buying spree on world markets yesterday after European leaders delivered a long-awaited action plan to tackle the eurozone debt crisis.

The FTSE 100 Index climbed 3%, or 160.6 points to 5713.8, after leaders agreed to bolster banks’ finances, allow banks to write off 50% of Greek debt, and boost the eurozone bailout fund to €1 trillion.

Some £41.5 billion (€47bn) was added to the value of London’s top 100 shares, with Barclays the biggest riser, up 18%.

Taxpayer-backed Royal Bank of Scotland and Lloyds also made strong gains.

London’s leading shares index hit its highest level since August 2, which was shortly after panic about the eurozone began to set in.

Elsewhere, France’s CAC-40 was ahead 6% and the Dax in Germany jumped 5%.

Brent crude oil rose 2% to $112 a barrel as investors took a rosier view of prospects for the world economy.

The euro surged on currency markets following the deal, whereas the dollar was sold off as investors jettisoned so-called “safe haven” assets and moved instead to riskier investments, such as metals and other commodities.

Banking stocks also surged as the agreement meant the sector was set to be shored up against future collapse.

Michael Hewson, an analyst at CMC Markets, said: “Equity markets have soared as the prospect of a meltdown of the European banking system appears to have been averted for now.

“The US dollar has been pulverised today as investors have gorged on risk assets.

“The only concern is that this post-deal euphoria could well leave investors with a nasty hangover when they start to look at the fine print and realise that this solution could well be another sticking plaster.”

Traders’ moods were also boosted after figures showed the US economy grew 2.5% between July and September, compared to the same period the previous year. This was nearly double the rate of growth in the previous three months.

Wall Street’s Dow Jones Industrial Average rose by more than 2% as the London market closed.