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Alexkid

Bond-buying program shores up European markets
PAN PYLAS
(The Associated Press)



06:44:47AM (DST) Monday,8.8.11.

LONDON (AP) — A pledge from the European Central Bank to support the shaky bonds of Italy and Spain helped calm investor nerves in Europe Monday despite big losses in Asia following the downgrade of U.S. debt by Standard & Poor's.

Though Europe's main markets in London, Paris, and Frankfurt were trading lower, albeit modestly, the exchanges in Milan and Madrid were posting sizable gains as the borrowing costs for both Italy and Spain plunged to more manageable levels after the European Central Bank said it would buy the two countries' bonds in order to help them avoid devastating defaults.

Late Sunday, Europe's central bank said it would "actively implement" its bond-buying program to calm investor concerns that Italy and Spain won't be able to pay their debts. Last week, worries over the two countries' ability to keep tapping bond markets contributed to the turmoil in global markets, which saw around $1.5 trillion wiped off share prices.

Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing world also issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.

"We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets," they said.

For now the proclamations appear to have stemmed the selling tide, which has gripped global markets over the past couple of week. And in the case of Italy and Spain, the pledges of support have sharply reduced the two countries' market borrowing costs and helped their stock markets push ahead. Milan's FTSE MIB was up 2.3 percent, while Spain's rose 2.6 percent.

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Reading between the lines this is a counter-measure for last weeks American downgrade.
Are there lessons to be (financial)learned ?

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Yeah...Do That.