NEW YORK (Reuters) - Global stocks rallied and the dollar slid on Wednesday after the world’s leading central banks moved to ensure that financial markets rocked by the euro zone’s escalating debt crisis have sufficient funding.
The U.S. Federal Reserve, the European Central Bank and the central banks of Britain, Canada, Japan and Switzerland said they agreed to lower the cost of existing dollar swap lines by 50 basis points from next Monday, among other measures.
A rally in global stock markets started earlier in the day when China’s central bank moved to ease credit strains by cutting reserve requirements for its commercial lenders for the first time in nearly three years.
The Chinese measure and the coordinated move by the major central banks of the developed world comes amid growing concern that the global economy is on a slippery slope as the euro zone struggles to decisively tackle its two-year-old debt crisis.
Both measures bolstered the appetite for risk, lifting assets such as stocks and commodities while leading investors to dump the safe-haven dollar.
The dollar index .DXY fell 1.1 percent to 78.132, and the euro gained 1.3 percent to $1.3492.
European stocks .FTEU3 extended gains to trade 3 percent higher. On Wall Street, stocks zoomed more than 2 percent higher after markets opened.
The Dow Jones industrial average .DJI was up 324.69 points, or 2.81 percent, at 11,880.32. The Standard & Poor’s 500 Index .SPX was up 31.60 points, or 2.64 percent, at 1,226.79. The Nasdaq Composite Index .IXIC was up 71.16 points, or 2.83 percent, at 2,586.67.
“It’s a clear indication that policy-makers are beginning to take credit issues in Europe very, very seriously,” said Boris Schlossberg, director of FX research at GFT in Jersey City, New Jersey.
“We’re clearly seeing some very big stresses in the global banking system and they wanted to do a preemptive strike. The fact that this was a coordinated move took the market by surprise and lifted all risk trades.”
A higher-than-expected U.S. private sector jobs report for November also boosted sentiment. The ADP National Employment report indicated that U.S. private sector jobs grew by 206,000 this month, compared with a consensus forecast of 130,000.
German bond yields fell and the benchmark U.S. 10-year Treasury note slid a point in price.
Ten-year German government bond yields were 3 basis points lower at 2.26 percent.
The benchmark 10-year U.S. Treasury note was down 26/32 in price to yield 2.08 percent.
Oil prices jumped. Brent crude was up 59 cents to $111.41 a barrel. U.S. crude gained $1.45 to $101.24 a barrel.
Spot gold prices rose $27.90 to $1,743.70 an ounce.
Additional reporting by Gertrude Chavez-Dreyfuss and Chris Reese in New York, Simon Falush, Ethan Bilby, Marius Zaharia, Anirban Nag and Ana Nicolaci da Costa in London; Writing by Herbert Lash; Editing by James Dalgleish