NEW YORK Global stocks rallied for a third straight day and oil prices surged on Thursday on renewed European efforts to aid ailing regional banks and as a ho-hum U.S. jobs report still managed to ease fears of a new recession.
The European Central Bank threw a lifeline to struggling European banks with a renewed offer of longer-term loans to ward off a new credit crunch and the European Union readied a plan to recapitalize banks.
European stocks jumped and Wall Street rallied further from recent losses that had driven stocks into bear market territory on Tuesday as investors took heart that officials in Europe are finally coming to grips with the simmering debt crisis.
Investors have swung from euphoria to despair on headlines from Europe, which has translated into high volatility and a market that is directionless, said Doug Roberts, chief investment strategist of Channel Capital Research.
"We're popping back up again, based on the idea they will reach an agreement and rescue us," Roberts said.
The euro rallied for a third day against the dollar, and government debt prices on both sides of the Atlantic slid after the ECB's actions eased fears the region's recovering economies would slump back into recession.
The euro gained 0.6 percent at $1.3433, and European shares closed up more than 2 percent. Equity markets in London gained more than 3 percent after the Bank of England moved to spur a sluggish UK economy by enlarging a stimulus program.
Jean-Claude Trichet, in his final news conference as president of the ECB, said the bank's governing council decided to launch a covered-bond purchase program by spending 40 billion euros over a 12-month period from November. Covered bonds are backed by assets such as mortgages and public sector bonds and are perceived as safe and high-quality assets.
"The abundance of liquidity measures announced shows the ECB's resolve to boost liquidity, and that is quite satisfactory to the market, easing tensions in the financial and banking sectors," said Kathy Lien, director of FX research at GFT in Jersey City, New Jersey.
The Dow Jones industrial average .DJI closed up 183.38 points, or 1.68 percent, at 11,123.33. The Standard & Poor's 500 Index .SPX rose 20.94 points, or 1.83 percent, at 1,164.97. The Nasdaq Composite Index .IXIC gained 46.31 points, or 1.88 percent, at 2,506.82.
Reaction to the death of Apple (AAPL.O) co-founder Steve Jobs was muted as the company's shares slipped 0.2 percent.
The euro rose, but few market participants believe the new ECB measures will be sufficient to resolve the debt crisis. Most remained bearish on the euro for the rest of the year.
"We believe liquidity (measures) and, eventually, policy rate easing, are likely to remain a negative for the euro in the coming months and maintain a bias to sell rallies," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York.
Oil prices surged on the developments in Europe and on U.S. data that showed new claims for jobless benefits rose less than expected last week, hinting at an improved labor market a day before the government's closely watched monthly non-farm payrolls report for September.
"The markets are looking to embrace even the slightest improvement in the economy," said John Kilduff, a partner at hedge fund Again Capital in New York.
Brent crude futures for November rose $3.00 to settle at $105.73 a barrel, and U.S. crude gained $2.91 to settle at $82.59 a barrel.
The U.S. Treasuries market slumped as the ECB moves and the U.S. jobs data reduced the safe-haven bids for bonds.
The benchmark 10-year U.S. Treasury note fell 29/32 in price to yield 1.99 percent.
Gold rose in thin trade for a second session, boosted by a rally in equities and commodities.
Spot gold prices rose $10.19 to $1,650.50 an ounce.
U.S. gold futures for December delivery settled up $11.60 at $1,653.20 an ounce.
(Reporting by Richard Leong, Wanfeng Zhou in New York; Blaise Robinson in Paris; Writing by Herbert Lash; Editing by Leslie Adler)