European and Asian Markets Rise On New International Assurances

Following a Friday meeting of the G-7 (Economic leaders of the top 7 industrialized nations) and the British government's initialization of a program to inject capital into their banks--Asian and European markets rally.

The G-7 concluding statement was steeped in vagueness, but the potentially most weighty assurance was that they collectively agreed to "back any systemically important financial institution."

There are cautious tones in the market, but market analysts and government leaders are hopefully this is the kick off of a bear market rally. The Hang Seng was up 9.5 percent, the Shanghai Composite up 3.7 percent, UK FTSE up 5.6 percent, the German DAX up 6.2 percent, and the French CAC 40 up 6.7 percent.

Markets have been moving in concert throughout the past two weeks and the US market hopes the same will hold true as it approaches its Monday open.

Secretary of Treasury Hank Paulson and the White House hasten talk of following the British lead and injecting capital directly into banks, to strengthen balance sheets and restore interbank lending confidence. Statements from Treasury and the White House indicated that process would begin within the coming week.

Morgan Stanley seems to have secured its bailout from Mitsubishi UFJ. However, the final deal is expected to bring significant dilution to current shareholders. The deal continually teetering on failure, with little competition, is likely to bring capital at a very high price. Critics are blaming the prolonged nature of the negotiation for the high price, as the uncertanty weaken the Morgan Stanley stock price.

The short-term US financial institutional outlook seems far more stable than the previous two weeks.

Goldman Sachs and Morgan Stanley, the two remaining investment banks, have seemingly raised the necessary capital to stabilize their balance sheets. Banks are expected to get government capital to do the same. And, the $700 billion mortgage buy-back program is completing its necessary operational stand up.

All of the pieces to a complex puzzle seem to be in place to steady the ship, barring any surprises to the market.