Markets rallied today on signs that the political establishment in Europe was moving toward something approaching normalcy — with Italy’s senate approving an austerity package and Greece naming a new prime minister.

 

The FTSE 100 in London closed up 1.9 percent to 5,545.38, while the CAC 40 in Paris finished up 2.8 percent 3,149.38, the DAX in Frankfurt jumped 3.2 percent to 6,057.03 and the FTSE MIB in Milan ended the day up 3.7 percent at 15,778.85.

 

Banking shares continued to rise during the day, with Royal Bank of Scotland and Lloyds Banking Group among the big gainers in London, while Deutsche Bank and Commerzbank AG were among the winners in Frankfurt.

 

Headed into the close on Wall Street, the S&P Retail Index was up 2.1 percent, or 11.27 points, to 546.18 and the Dow Jones Industrial Average was up 2.1 percent, or 251.72 points, to 12,145.51.

 

The Italian budget package now goes to the country’s lower house, which is expected to approve it this weekend. Prime Minister Silvio Berlusconi agreed to step down once the measures were passed. And Italy’s borrowing costs, which vexed investors earlier this week, fell to 6.5 percent down from their high over 7 percent.

 

In Greece, Lucas Papademos was named prime minister. He aims to keep the euro. European fashion and luxury stocks were almost all up at the close of trading this afternoon. Tod’s surged 7.3 percent to 75.1 euros on the back of strong growth in nine-month profits and revenues, Ferragamo rose 3.3 percent to 11.89 euros and LVMH Moet Hennessy Louis Vuitton closed up 2.1 percent at 117 euros. In terms of retailers, Marks & Spencer finished up 2.9 percent at 3.3 pounds, Carrefour jumped 4.4 percent at 20.2 euros and ASOS ended the day up 1.1 percent at 14.6 pounds per share.

 

On Friday, the Euro traded at $1.36 and the pound traded at $1.56.

 

Among the biggest U.S. gainers were Under Armour Inc., 3.2 percent to $83.65; Limited Brands Inc., 3 percent to $43.56; Gap Inc., 2.6 percent to $20.19; Urban Outfitters Inc., 2 percent to $26.70, and Tiffany & Co., 1.9 percent to $76.59.

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