Last week's doom and gloom in world stock markets was tempered by Monday's astounding gains, the largest since the great depression. The Dow rose 11% the largest one day gain since 1933. It was the 5th largest percentage gain ever and followed a weekly 18% decline, the largest in the New York Stock Exchange's history. The gains followed a weekend of meetings of central banks and the International Monetary Fund and the announcement of government plans to rescue banks through direct capital injections.



Investors are debating whether the rally will be temporary or signal more stability in world markets. Market rallies have a mixed history. Of the five past one-day gains of 10% or more, two marked the end of bear markets, in 1987 and 1933. Three others, in 1929, 1931, and 1932, were followed by further declines in the market. Because of this mixed history it is difficult to predict what direction markets will take.

Despite Monday's dramatic gains the Dow remains down 34% from its historical high of 14164.53 on October 9, 2007. Monday's gains surpassed the historic rally of 1987 which occurred shortly after the crash of 87. Investors got more good news when it was announced that part of the Bush administration's plan would include investing roughly $250 billion in banks, providing guarantees of bank debt, and increasing the insurance on certain bank deposits. European bank rescue plans, which were announced on Monday, helped to lift the US stock market.

European bond markets were functioning Monday and investors reacted by selling ultra safe bonds and moving back into stocks. There were also signs that frozen credit markets are beginning to thaw. The cost of futures contracts that correlate to the market rate at which banks lend to one another, the London interbank offered rate, or Libor, indicated that many traders believe that the rate will come down.

There were other signs that indicate that investors believe that any recession will be relatively short. Stocks tied to economic growth were up with energy companies up 16%, tech stocks up 12%, and mining companies were up 14%. Gold futures were down 1.9% at $838.90 an ounce.

On Monday central banks acted in unison to ease the demand for dollars by banks. The currency-swap arrangements between the U.S. Federal Reserve and the Bank of England, the European Central Bank and the Swiss National Bank were changed to "accommodate whatever quantity of U.S. dollar funding is demanded." It is hoped that the combined actions will sustain the rally.

The market rally was beneficial to the Euro with slight gains on Forex markets and the US dollar remains strong even in the face of massive government debt. It is hoped by investors in both stock and Forex markets that the crisis is coming to an end and the Forex market will continue to offer the opportunities it has in the past.