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Eurozone move on Greece debt lifts stocks

The U.S. stock market surged Monday on the latest positive news out of Europe, closing with the fourth sharp increase in the last five trading days.

Indexes soared in the U.S. and Europe after French and German leaders promised to strengthen European banks. The Dow Jones industrial average shot up 330 points, its largest one-day jump since Aug. 11. The euro rose against the dollar.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said they would finalize a "comprehensive response" to the debt crisis by the end of the month, including a plan to make sure European banks have adequate capital.

Investors have been worried that European leaders weren't moving quickly enough to contain the fallout from a default by Greece's government.

"The more we can put our arms around the problem with a little more detail, the better, and time frames usually help," said Michael Sansoterra, a portfolio manager at Silvant Capital Management in Atlanta.

The Dow rose 330.06 points, or 2.97 percent, to 11,433.18. Bank of America Corp. rose 6.4 percent, the most of the 30 companies comprising the index. JPMorgan Chase & Co. rose 5.2 percent.

The Dow is up 7.3 percent since Oct. 4.

The Standard & Poor's 500 index rose 39.43 or 3.41 percent, to 1,194.89. On Oct. 4 the S&P 500 traded below 1,090, or 20 percent down from its recent peak in April. Had the index closed at or below that level, it would have met the common definition of a bear market.

The Nasdaq composite index rose 86.70, or 3.50 percent, to 2,566.05.

Bond trading was closed for Columbus Day. Ten stocks rose for every one that fell on the New York Stock Exchange. Trading volume was light at 3.8 billion.

European stock markets rose and the euro strengthened against the dollar on the latest indication that European leaders were making progress on containing the region's debt crisis. Germany's DAX rose 3 percent and France's CAC-40 rose 2.1 percent.

Investors were also relieved that troubled Franco-Belgian bank Dexia would be partially nationalized. Dexia owns large amounts of government bonds of indebted countries like Greece and Italy.

European banks have become more reluctant to lend to each other, putting overextended banks like Dexia in danger. That prompted the European Central Bank last week to offer unlimited one-year loans to the banks through 2013 to help give them access to credit.

Investors have been worried that a default by Greece could cause the value of Greek bonds held by those banks to plunge, hurting their balance sheets. U.S. banks could also be affected if Greece goes through a messy default, since they own Greek bonds and also have close ties to European banks.

Greek Finance Minister Evangelos Venizelos said Monday night that parliament must approve a new package of economic austerity measures before the country receives its next $10.9 billion rescue loan installment.

Venizelos said a key review by international debt inspectors was essentially concluded earlier Monday, with remaining "technical details" to be wrapped up Tuesday.

The new round of cuts includes plans to further cut public sector salaries and suspend 30,000 public servants on reduced pay starting this year -- reforms that have heightened dissent in the governing Socialist party and triggered a new round of strikes. Venizelos said the new measures are harsh but necessary to avoid a chaotic default.

"It is better to go back to the level of 2005 and 2004 rather than to go back to the state we were in 1960," Venizelos told private Mega television.

EU leaders have delayed a summit for several days until Oct. 23 to conclude talks on Greek aid and Europe's wider debt crisis.

Greek Prime Minister George Papandreou spoke with EU President Herman Van Rompuy by phone Monday and will meet him in Brussels on Thursday.

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