Markets jump as Merkel signals fiscal union for EU

German Chancellor Angela Merkel helped lift markets further today after revealing moves towards “fiscal union” in Europe were afoot.

Merkel said a new EU treaty was necessary to set up such a union, while stricter budget discipline also needed to be enforced.

“The lessons are very simple: Rules must be adhered to, adherence must be monitored, non-adherence must have consequences,” she said. Leaders also have to “overcome fundamental flaws in the construction of the euro area,” she said, according to Bloomberg.

The speech lifted markets which had already been in positive territory, with London’s FTSE 100 index up 1.27% to 5,569 by 2.40pm while the French Cac 40 climbed 1.65% to 3,181 and the German Dax gained 1.25% to 6,111.

Meanwhile, the Dow Jones has also opened higher this afternoon, boosted after the US unemployement rate fell to its lowest level since March 2009, from 9% to 8.6%. 

The decline in unemployment was supported by an uptick in US non-farm payrolls in November, which stood at 125,000, up from the 100,000 figure in October.

The Dow Jones gained 0.82% or 99 points on the opening bell to 12,119, with the index looking set to build on its 7% upswing so far this week.

All eyes are now back on Europe with investors pinning hopes on a crucial meeting between Merkel and French President Nicolas Sarkozy, who has also pushed for changes to the treaty to make Europe a more integrated and stricter union.

Such a step will prove vital in the resolution of the eurozone sovereign debt crisis, as EU leaders began ten days of emergency talks earlier this week.

In her speech to lawmakers in Berlin today, Merkel also rejected calls for euro bonds and shot down those calling for the European Central Bank (ECB) to provide quick fix lending solutions. She pointed out the ECB’s role differed to that of the Federal Reserve or the Bank of England.

The mid-morning surge follows a strong open this morning, as the FTSE 100 gained 1% immediately after open, continuing a positive trend this week.

Meanwhile US futures pointed to a sharply higher open on Wall Street this afternoon, with investors awaiting a key jobs report due to be released today.

The report is expected to show an increase of 122,000 jobs and a steady unemployment rate of 9%.

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