Stocks on major world markets were headed for their largest daily gain in over four months, with US stocks more than 1 per cent higher at the open on hope that euro zone officials were working to beef up the region's rescue fund to ease the debt crisis.
European shares rose for a second day and safe-haven German bonds fell on reports that European policymaker were preparing decisive action to tackle the region's sovereign debt crisis by leveraging up the €440 billion rescue pot.
The cost of insuring Italian, Spanish and French debt against default also fell on hopes of a bold solution, which appear to have little grounding in immediate political reality.
The Dow Jones industrial average gained 156.97 points, or 1.42 per cent, to 11,200.83. The Standard & Poor's 500 Index rose 17.17 points, or 1.48 per cent, to 1,180.12. The Nasdaq Composite Index climbed 46.29 points, or 1.84 per cent, to 2,562.98.
The euro extended gains against the US dollar, hitting session highs, boosted by gains in global stocks and US equity futures.
The euro rose to a peak of $1.36314 and was last at $1.36263, up 0.7 per cent.
The single currency had gained earlier on talk policymakers were planning to boost the regional bailout fund, halve Greece's debts and recapitalise banks, which encouraged profit-taking on short positions after yesterday's fall below $1.34.
"The market is beginning to get the feeling that finally European lawmakers are moving out of their paralysis," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
"Commodity prices are up across the board. There's hopes a global recession can be avoided."
The Irish market was 2.8 per cent higher this afternoon at 2509.34, led by rises in AIB, which gained 7.5 per cent to trade at 4.3 cent, and Elan, which was 6.1 per cent higher at €7.85.
The MSCI all-country world stock index was up 3.2 per cent, on track to its largest daily gain since May 14th. For the week thus far, the index is up 4.3 per cent, after dropping more than 7.0 per cent last week.
The broad-based rebound follows expectations built over the weekend from meetings of the International Monetary Fund in Washington DC which signalled European policymakers were acting to contain Greece's debt problems and resolve a crisis threatening to engulf the world economy.
Some officials have said plans were underway to boost the size of a regional bailout fund to cut Greece's debts and recapitalise banks, although others have underlined they these were at a very early stage. Germany has also said there are no plans to increase the size of the fund.
"Given so much uncertainty at the moment, there is room for both pessimism and optimism. The optimists have taken the forefront on hopes that we could see European politicians getting to grips with the current situation over the coming weeks," said Keith Bowman, analyst at Hargreaves Lansdown.
"But there are still a lot of concerns. Investors remain sceptical."
US crude oil jumped almost 4 per cent to above $83 per barrel. The spot price of gold, which tracks bullion, rose 1.7 per cent to above $1650 an ounce. The broad-based Reuters/Jefferies CRB Index for commodities climbed 2.2 per cent.
Reuters
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