World stocks surged and the euro jumped to a seven-week high against the dollar today after European leaders agreed on a sweeping plan to resolve the euro zone sovereign debt crisis.
The investor euphoria sent European shares more than 3 per cent higher while US stocks gained about 2 percent. The deal envisions a recapitalisation of European banks, a far more powerful rescue fund for the euro zone and 50 per cent losses for Greek debt holders.
For the moment investors shrugged off the fact that key aspects of the deal, including the mechanics of boosting the firepower of the European Financial Stability Facility and providing Greek debt relief, could take weeks to pin down.
The euro, surging past stop-loss points as investors reacted positively to the deal, gained 1.73 per cent to $1.4123.
"Investors around the world are cheering the fact that the Europeans have sucked it up and done what was necessary to mitigate a deeper crisis in the region," said Kathy Lien, director of research at GFT in Jersey City, New Jersey.
"Their sheer relief that the process hasn't been drawn out even further ... has provided a nice boost to risk appetite."
Data that showed the US economy grew at its fastest pace in a year in the third quarter as consumers and businesses stepped up spending also helped spur risk appetite.
US gross domestic product expanded at a 2.5 per cent annual rate in the third quarter, the Commerce Department said.
World stocks extended gains to hit their highest level since early August, with the MSCI all-country equity index rising 3.2 per cent and Europe's FTSEurofirst 300 index of top regional shares surging 3.2 percent.
On Wall Street, the Dow Jones industrial average was up 212.25 points, or 1.79 per cent, at 12,081.29. The Standard & Poor's 500 Index was up 24.20 points, or 1.95 per cent, at 1,266.20. The Nasdaq Composite Index was up 46.80 points, or 1.77 per cent, at 2,697.47.
Wall Street's "fear gauge," the CBOE Volatility Index, fell 12 per cent in a sign of investor sentiment.
Crude oil jumped to $112 a barrel as the European debt deal and supportive US data eased concerns that economic weakness could curb energy demand. Oil later pared gains.
ICE Brent December crude rose $2.55 to $111.46 a barrel. US light sweet crude oil rose $2.47 to $92.67 a barrel.
Prices of safe-haven US Treasuries and German Bunds fell, while those of highly indebted euro zone countries gained.
The benchmark 10-year US Treasury note was down 20/32 in price to yield 2.28 per cent.
Reuters
