New York - World stocks surged and the euro
jumped to a seven-week high against the dollar on Thursday after European
leaders agreed on a sweeping plan to resolve the euro zone sovereign debt
crisis.
European shares rose more than 3% and US stocks gained
almost as much on the euphoria. The deal envisions a recapitalization of
European banks, a far more powerful rescue fund for the euro zone and 50%
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 finalize.
The euro surged past stop-loss points as investors reacted
positively to the deal, gaining 2.3% to $1.4195.. Investors were forced
to unwind bets against the single currency as they looked for more details.
“The key signal is officials are taking steps in the right
direction, triggering this relief rally,” said Omer Esiner, chief market analyst
at Commonwealth Foreign Exchange.
World stocks extended gains to hit their highest level since early
August, with the MSCI all-country equity index rising 4%.
In Europe, shares soared to their highest close in 12 weeks, with
French banks, heavily exposed to euro zone peripheral debt, among the biggest
gainers.
Credit Agricole gained 22% and BNP Paribas shot up 17%.
The FTSEurofirst 300 index of top European shares ended the session
up 3.7% at 1 020.10, the highest close since Aug. 3.
“Decisions have been made, whatever they are, and that’s a good
thing. I fear further down the road we’ll find they’re not as good as we
thought,” said Gavin Launder, fund manager at Legal & General, which has 356
billion pounds ($570 billion) under management.
Data showing the U.S. 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% annual rate
in the third quarter, the Commerce Department said.
On Wall Street, the Dow Jones industrial average was up 305.83
points, or 2.58%, at 12 174.87. The Standard & Poor’s 500 Index was
up 35.29 points, or 2.84%, at 1 277.29. The Nasdaq Composite Index was up
72.82 points, or 2.75%, at 2 723.49.
Wall Street’s “fear gauge,” the CBOE Volatility Index, fell 15% 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 $3.31 to $112.22 a barrel. U.S. light
sweet crude oil rose $3.19 to $93.39 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 30/32 in price to
yield 2.31%.
Spot gold prices rose $22.54 to $1 746.20 an ounce.