Europe bank rescue plan brings hope
Chaotic financial markets may react positively this week to a long-sought coordinated response by world leaders to a financial tsunami threatening to wipe out the global banking sector, Reuters repotred.
The global financial system was on the brink of meltdown on Saturday after finance chiefs from the Group of Seven rich nations failed to agree on concrete, joint measures to end the crisis.
But European leaders rushed to Paris on Sunday to come up with a tangible plan to unfreeze capital markets and restore confidence.
Their plan included state guarantees for new medium-term bank debt and state injections of capital into banks, adding to help from the European Central Bank to unfreeze commercial paper markets.
They're stepping up to the plate with all their fire power. It is literally a financial, economic call to arms," said Peter Kenny, managing director at Knight Equity Markets in Jersey City.
"It is not going to be overnight but it is going to help a lot. It is going to take the edge of panic off market psychology," he added.
U.S. stock futures opened higher on Sunday, suggesting Wall Street may rebound on Monday after eight straight sessions of losses on the benchmark S&P 500 index .
But volatility is unlikely to go away any time soon, analysts and bankers warned, because confidence cannot be restored overnight.
"It is impossible to talk about how long it takes" to stabilise markets," Deutsche Bank CEO Josef Ackermann said on Sunday in Washington.
"The loss of confidence has been so substantial that it will not happen overnight. But that is why some guarantees, some capital from governments in certain banks is necessary in order to speed up this restoring of confidence," he added.
Also contributing to the volatility this week will be key third-quarter corporate earnings results from major banks and companies. The numbers will reveal the scale of damage suffered by the real economy from market turbulence which erupted in August 2007.
JP Morgan , Wells Fargo , Bank of New York Mellon , Citigroup , and Merrill Lynch are among banks which will unveil earnings for the three months ending September, the month when Lehman Brothers collapsed and several U.S. and European financial firms were bailed out.