Those hopes were raised by the outcome of a teleconference Wednesday between the leaders of France, Germany and Greece, who attempted to quash speculation that a Greek default was imminent and reaffirmed their belief that Greece remained an “integral part” of the eurozone.

German Chancellor Angela Merkel and French President Nicolas Sarkozy stressed to Greek Prime Minister George Papandreou that his debt-crippled country needs to honor its commitments on making savings and enacting reforms. Papandreou renewed his pledge ahead of Thursday’s Greek cabinet meeting where the reform program will top the agenda.

Although the three leaders’ comments about their talks were minimal, investors appear to be relieved that Greece wasn’t being set up for a default or a possible exit from the eurozone, which could wreak havoc in markets.

A review of Greek financial progress from the so-called troika — the European Commission, the European Central Bank and the International Monetary Fund — is due to resume in coming days.

“Markets are still speculating on Greece’s bankruptcy, although short-term the troika is expected to release funds for Greece,” said Benoit de Broissia at KBL Richelieu.

In Europe, all stock markets were higher, while the euro pushed back up above the $1.38 mark for the first time this week.

UBS shares were down 7 percent on the news that the Swiss bank had a rogue trader who caused it an estimated loss of $2 billion, and police in London arrested a 31-year-old man in the case.

Germany’s DAX was up 2.2 percent at 5,459 while France’s CAC-40 rose 2.1 percent to 3,012. The FTSE 100 index of leading British shares was up 1.6 percent too at 5,310.

Wall Street was poised for further modest gains after its first three-year rally since the end of August — Dow futures were up 0.4 percent at 11,223 while the broader Standard Poor’s 500 futures rose 0.5 percent to 1,188.

Despite the relief rally, investors are fully aware that Greece has not delivered all its promised over the past year and a half since it was granted it’s first euro110 billion ($151 billion) bailout package.

Also, concerns over the passing of key anti-crisis measures across European capitals remain, especially after Austria indicated it wouldn’t be able to fast-track the plans announced in July by eurozone leaders.

And investors want to see Europe come up with a more credible plan of action than the one it has pursued. A meeting of eurozone finance ministers in Poland over the coming days, which will also include U.S. Treasury Secretary Timothy Geithner, will be monitored in that context.

Germany, in particular, as Europe’s richest economy, is also under pressure to do more.

Merkel said Thursday it is “completely clear” that Germany, the continent’s biggest economy, has a “duty and responsibility to make its contribution to securing the euro’s future.”

However, she appeared to again reject calls for the introduction of a eurobond, whereby the eurozone would pool together to issue debt. Stabilizing the currency union will be a step-by-step process and “won’t happen overnight or with any one-time thunderbolt,” she said.

Greece’s debts stands at about 150 percent of GDP and the markets are increasingly of the view that with the Greek economy shrinking, the banks will have to accept they’re not going to be paid back all that they are owed. The main market debate is what sort of writedown — the so-called haircut — financial institutions, who lent Greece the money, will have to accept.

“It still seems a little early to stop making back of envelope calculations about how deep the haircuts would need to be to bring Greece’s debt back to what most would see as being a more sustainable level, say 60 percent of GDP or less,” said Simon Derrick, an analyst at Bank of New York Mellon.

Earlier stocks in Asia were buoyed by the Greek developments. Standouts were Japan’s Nikkei 225 index, which rose 1.7 percent to 8,668.86 while South Korea’s Kospi advanced 1.4 percent to 1,774.08. Hong Kong’s Hang Seng ended 0.7 percent higher at 19,181.50 but China’s main index in Shanghai fell 0.2 percent to 2,479.05.

Oil prices rose modestly alongside the better tone in stock markets — benchmark oil for October delivery was up 14 cents $89.05 per barrel in electronic trading on the New York Mercantile Exchange.

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Kelvin Chan in Hong Kong contributed to this report.

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