Wall Street opened higher on the first relatively calm Monday in a month amid signs banks were lending to each other again, an indication of hope the world's financial crisis may be easing.
European banks prepared to make use of state rescue packages, helping shares rise by more than 2 percent, and U.S. stocks climbed in early trade with all the major indexes up more than 1 percent.
The comparative optimism follows weeks of market-rattling weekend announcements since Lehman Brothers collapsed in mid-September.
Governments have promised $3.3 trillion — about equal to the economic output of Germany — to guarantee bank deposits and bank-to-bank lending, and in some cases have taken stakes in banks with toxic assets.
"There's a perception that the crisis squeeze could be beginning to abate thanks to measures from global authorities over the past few weeks," said Philip Shaw, chief economist at Investec.
Pre-market stirrings came from Asia, where South Korea released a $130 billion rescue package, and China on Monday reported that economic growth eased in the third quarter and forecast a further slowing in the fourth quarter.
Other major economies also showed signs of a slowdown. The Bundesbank said Germany's economy probably stagnated in the third quarter. In India, the central bank unexpectedly cut its key lending rate for the first time in more than four years.
But the interbank cost of borrowing dollars and euros fell across all maturities on Monday, offering hope that banks were regaining the confidence to lend each other again.
The decline in interbank lending rates helped nudge U.S. stock futures higher as did rallies in Asia and Europe, where investors applauded additional measures by governments to tackle the global credit crunch.
"Whilst we are clearly not out of the woods yet, investors are looking for anything to hang their hats on," said Chris Hossain, senior sales manager at ODL Securities.
Oil braked its fall on Monday, rising nearly $2 on expectations OPEC may reduce output. The price of crude oil has sunk more than 50 percent since climbing to a record high above $147 per barrel in July.
One indicator of how the crisis is affecting the real economy will come later on Monday when American Express, the fourth-largest U.S. credit card issuer, reports earnings, probably before the closing bell.
On the political front, Democrat Barack Obama's campaign received a double shot of good news on Sunday when he reported raising a record $150 million in September and former Secretary of State Colin Powell endorsed Obama over fellow Republican John McCain.
EUROPEAN BAILOUTS
Germany's cabinet approved strict conditions for banks that make use of its 500 billion euro ($674 billion) rescue package, including limits on managers' salaries, bonuses and severance.
"The criteria for appropriate (remuneration) are based on responsibilities and personal performance, business conditions and the success and outlook of the company compared to others in its field," the provisions agreed by cabinet stated.
Bavaria's public sector bank, BayernLB, was ready to ask for funds, Bavaria's finance minister said. Commerzbank said it would take a close look at using the funds.
Societe Generale led a steep fall by France's top three banks on heightened concern it may be next in line for state funds.
On Sunday, the Dutch government agreed to a 10 billion euro cash injection into financial group ING, powering its shares higher by almost 23 percent.
ING said it had agreed to sell its Taiwan Life insurance unit to Fubon Financial for $600 million, increasing its capital in a deal analysts said would benefit shareholders.
"We are in a large financial storm, and the storm has been building in recent weeks. We wanted to make sure we had a buffer, a buffer large enough to carry us through the storm," ING Chief Financial Officer John Hele told CNBC television.
In Sweden, the government outlined a plan worth more than 1.5 trillion crowns ($270 billion) that would include credit guarantees and a bail-out fund.
