NEW YORK – US stocks surged Monday amid news that Greece’s IMF representative might be chosen prime minister, after a day of Greek worries had sent European markets lower.
US markets spent most of the day in negative territory, only to jump sharply in the last two hours of trade following reports that Greece’s tentative unity government could choose International Monetary Fund representative Panagiotis Roumeliotis to replace George Papandreou.
With the IMF a key player in Greece’s rescue, former finance minister Roumeliotis conceivably would be well-placed to ensure the bailout progresses steadily and to restore market trust both in Greece and the eurozone.
The news helped US stocks rebound from early losses: the Dow Jones Industrial Average closed up 0.71 percent to 12,068.39, while the broader S&P 500 added 0.63 percent to 1,261.12.
“Investors seem unable to take their cues from anywhere” but in Europe, said Karee Venema at Schaeffer’s Investment Research. “Italy has snagged the spotlight from Greece in the ongoing European fiscal fiasco.”
Earlier Europe’s main markets slumped as the eurozone remained mired in crisis. The FTSE-100 closed down 0.30 percent at 5,510.82 points; the CAC-40 fell 0.64 percent to 3,103.60, and the DAX 30 shed 0.63 percent to 5,928.68 points.
Milan bucked the trend, gaining 1.32 percent while Madrid fell 1.40 percent.
In Asian trade earlier Monday, Tokyo lost 0.39 percent and Hong Kong was down 0.83 percent.
The euro slipped slightly from late Friday’s $1.3788 to $1.3773, while the dollar fell to 78.06 yen from 78.23 yen.
Most of the day was spent in worry over whether the Greek political deal would hold and lead to a solid commitment to the European Union bailout, seen as crucial to stabilizing the entire eurozone.
Italy was on the verge of being caught up in the contagion, and Italian bond yields zoomed up to 6.65 percent in late trade as Prime Minister Silvio Berlusconi fought to save his political skin.
Italian stocks rallied strongly on the rumors — strongly denied — that Berlusconi was set to resign, with investors hoping a new government would provide more convincing leadership.
Dealers said the latest twist in the Greek saga over its on-off debt bailout was on the face of it positive but still left much unsettled, with elections now planned for February set to prolong the uncertainty.
The change in the mood over Italy heightened worries.
“Italy is sufficiently large to destabilize the eurozone,” said Cyril Regnat, a bond strategist at French bank Natixis, warning that the country could become a “systemic risk” for the entire 17-nation area.