Northern American stock markets ended on a high note Friday as investors took kindly to the U.S. government's plan to bail out Wall Street banks, ending one of the wildest weeks in market history.
The Toronto Stock Exchange closed up almost 850 points, the biggest gain since the 'Black Monday' crash in 1987.
On Wall Street, the Dow Jones industrial closed up more than 300 points, on top of a 400 point gain on Thursday.
"This is going to be remembered as a historic week in equity markets," George Vasic, equity strategist and chief economist at UBS Warburg, told The Canadian Press.
The market soared as the U.S. moved to prop up their financial system. Key measures include: taking billions of dollars of bad debt from banks, and a ban on short selling, or placing bets that a stock will fail.
BNN's Michael Hainsworth said that Toronto markets responded positively to the U.S. changes on the assumption that Americans will start consuming more Canadian products.
"The banks themselves can go, 'Our balance sheets are fabulous, we can start lending money,'" he told 麻豆影视net Friday.
Canadian Prime Minister Stephen Harper said there would be no bank bailouts in Canada, citing a 'strong' economy.
The U.S. plan
U.S. Treasury Secretary Henry Paulson said Friday the bold plan will be expensive but less costly than if the government does nothing.
Paulson said he will work through the weekend with congressional leaders to finalize the plan.
It "must be finely designed and sufficiently large to have maximum impact," he said.
U.S. President George Bush said Friday the "unprecedented action" was necessary to fix the current economic situation.
"We believe that this decisive government action is needed to preserve America's financial system and sustain America's overall economy," he said.
"These measures will require us to put a significant amount of taxpayer dollars on the line."
Bush said any further stress on financial markets would cause massive job losses, devastate retirement accounts, erode housing values and dry up loans for homes, cars and college tuitions.
Daniel McCormack, a strategist for Macquarie Securities in Hong Kong, said the U.S. plan has given investors a "light at the end of the tunnel.
"The solution is of such a magnitude that it could eventually fix the problems," he said. "That's hugely important at the moment because that's what markets are focused on."
Short-selling banned
Meanwhile, in a dramatic step Friday, the U.S. Securities and Exchange Commission temporarily banned short-selling of financial stocks.
Short-selling is the practice of betting against company stocks. Short-sellers borrow shares in hopes of selling them later at a lower price while claiming the difference.
Some short-sellers have been accused of spreading false rumours to make sure stock prices fall.
"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement.
"The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."
Canadian regulators were also considering banning the trading practice Friday, the head of Quebec's securities regulator confirmed.
Jean St-Gelais said a decision will be made soon but he provided no definitive time frame.
By Friday afternoon, no update on the situation had been given by provincial securities commissions or by the market-watchdog Investment Industry Regulatory Organization of Canada (IIROC).
Jean Charles Robillard, spokesman for TMX Group Inc., which operates the Toronto Stock Exchange and TSX Venture Exchange, said he was not involved in the process.
"I know IIROC is involved; I suppose they are talking with the regulators as well," Robillard told The Canadian Press. "This is not our call."
Heavy amounts of short-selling have been blamed as one of the reasons for the fall of investment firm Lehman Brothers and other major companies.
With files from The Canadian Press
