But some analysts said that while the deal helped to give the financial markets confidence, there remained questions about its implementation, and that fully fixing the problems of excessive debt and weak growth could take years.
Still, after days of anticipation, the markets put whatever uncertainties remained behind them, at least for the short term. Stocks were up as much as 6 percent in Europe, and Wall Street’s three main indexes jumped more than 2 percent at the opening, putting the broader market higher for the year to date. Asia also closed higher.
It was a marked turn-around from just a few weeks ago, when anxiety over the European debt crisis helped push the broader market in the United States to the brink of a bear market. On Oct. 3, the Standard Poor’s 500 index was down 19.4 percent from its high on April 29.
The latest news from Europe came early Thursday, when officials from the European Union and the International Monetary Fund reached a deal with bankers to write down the face value of their Greek debt by 50 percent, hoping to reduce the ratio of the country’s debt to gross domestic product to 120 percent by 2020. Economists believe that is essential if Greece is not to default on its loans.
Officials also agreed that European banks would need to raise more capital and said they would increase the euro zone bailout fund to $1.4 trillion, a move that they hope will provide the capacity necessary to keep Italy and Spain from following Greece’s painful path.
The measures are not complete, but after anxiety had run high before the meeting, investors greeted the signs of apparent success by bidding stocks higher.
“I think it is a very good step but I don’t think it is the complete package,” said Russell Price, the senior economist with Ameriprise Financial. “That is going to take years to make sure some of these heavily indebted countries are going to be able to bring down their debt.”
Mr. Price noted that the agreement sent a message to the financial markets that the European leaders were “willing to do whatever it takes” to solve the problem.
“I think that has given the markets confidence in the system and that is really what is propelling” trading, he added.
In late trading in Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 5.7 percent, while the FTSE 100 index in London gained 2.6 percent.
Financial shares led European indexes. BNP Paribas rose 15 percent, Société Générale rose 13 percent, Deutsche Bank rose 15 percent and H.S.B.C. Holdings rose 4.3 percent.
On Wall Street, the Standard Poor’s 500-stock index rose 2.4 percent, turning positive for the year to date. The Dow Jones industrial average and the Nasdaq composite index were both up about 2.1 percent.
The United States 10-year Treasury bond yield rose to 2.27 percent, from 2.21 percent on Wednesday.
Anthony Valeri, a fixed income investment strategist for LPL Financial, said that the European deal, to an extent, removed one of the lingering risks to the market and more specifically, to the banking system.
“But the devil is in the details,” he added. “There are some implementation risks going forward.”
He said there were questions about participation in increasing the bailout fund.
“We don’t know the participation from private investors or the emerging market countries, as the case may be,” he said.
Another negative was that banks must meet a new core capital ratio of 9 percent by the middle of 2012, he added. That could mean they could either raise capital or shed assets, which would be a negative for the market because of the pressure on prices.
In Asia, shares were stronger almost across the board. The Tokyo benchmark Nikkei 225 stock average rose 2 percent, the Sydney market index S.P./ASX 200 rose 2.5 percent, and Hong Kong’s Hang Seng index rose 3.3 percent.
“Bank recapitalization, haircuts and more firepower for the rescue funds are supposed to form a euro-style bazooka,” Carsten Brzeski, an economist with ING in Brussels, said in a research note. “Even if there are still loose ends and unsolved questions, yesterday’s summit was an important step in the right direction.”
Shortly after the deal was announced, United States crude oil futures for December delivery rose 2.8 percent to $92.71 a barrel. Comex gold futures slipped were mostly unchanged, at $1,723.40 an ounce.
The dollar was mixed against most other major currencies. The euro rose to $1.4140 from $1.3906 late Wednesday in New York, while the British pound rose to $1.6059 from $1.5975. But the dollar fell to 75.83 yen from 76.17 yen, and to 0.8640 Swiss franc from 0.8810 franc.
Bond market movements showed investors moving out of the securities considered the most secure and into riskier assets.
The Federal Reserve on Thursday is starting a bond buy-back measure that will bump up prices on long-term notes, Mr. Valeri said.
Bond prices for embattled euro zone governments rose sharply, while the yields fell. The yield on Greek 10-year bonds was 22.16 percent, down 1.17 percentage points. Spanish and Italian bond yields also fell.
David Jolly reported from Paris.
Article source: http://www.nytimes.com/2011/10/28/business/daily-stock-market-activity.html?partner=rss&emc=rss
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