Global stocks rose sharply on Thursday and the price of government debt fell on optimism over efforts by world leaders meeting in London to solve the economic crisis and a change in U.S. accounting rules that will help troubled banks.
Oil prices surged more than 8.0 percent to above $52 a barrel after world leaders at the G20 summit agreed to pump an additional $1 trillion into the ailing global economy through extra funding for groups like the International Monetary Fund.
The positive tone coming from the G20 summit raised the risk appetite for many asset classes by raising hopes among investors that a coordinated effort was underway to tackle the worst economic downturn since the Great Depression.
U.S. government bonds extended losses as investors piled into equities while euro zone government bonds slid after the European Central Bank cut interest rates a less-than-expected one-quarter percentage point to 1.25 percent.
The euro soared to nearly $1.35 after the ECB confounded expectations for a deeper cut to 1.0 percent. But the euro eased a bit after ECB President Jean-Claude Trichet refused to rule out additional rate cuts in the future.
The G20 news and the change in FASB accounting rules more than offset data which showed the number of U.S. workers filing new claims for jobless benefits rose to the highest in more than 26 years in the latest week.
Stock markets in Europe, on Wall Street and an index for global stocks all rose more than 4.0 percent and an equities index for emerging markets surged more than 6.0 percent.
Financial shares, a sector that led stocks deep into bear territory but a key driver behind a recent equity rally, surged on bets for an improving global economy and the easing of U.S. accounting rules that have battered their balance sheets.
"Relaxing mark-to-market does give the banks a little more flexibility that they can perhaps mark a few things up," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
"It's also the symbolism of the G20 that there will be coordinated efforts to stimulate the world economy."
The Dow Jones industrial average <.DJI> rose 306.80 points, or 3.95 percent, at 8,068.40. The Standard & Poor's 500 Index <.SPX> gained 33.77 points, or 4.16 percent, at 844.85. The Nasdaq Composite Index <.IXIC> climbed 70.96 points, or 4.57 percent, at 1,622.56.
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares surged 4.9 percent to 781.48 points, leaving the index still down about 6 percent for the year.
"Generally there have been positive noises coming out of the G20, and Trichet at lunch time was talking about the likelihood of a recovery in 2010," said Jim Wood-Smith, head of research at Williams de Broe.
The euro was strengthened after Trichet said officials had yet to decide on "non-standard" policy measures and would offer more details at the central bank's next policy meeting in May.
"The ECB is still concerned about preserving the integrity of its currency," said Boris Schlossberg, head of FX research at GFT Forex in New York. "They do not want to debase it in any way, shape or form by doing radical unconventional measures."
The euro jumped 1.91 percent at $1.3484, while the dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> off 1.45 percent at 84.185.
Against the yen, the dollar rose 0.88 percent at 99.41.
U.S. government bonds extended losses.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell 30/32 in price to yield 2.76 percent. The 2-year U.S. Treasury note <US2YT=RR> fell 5/32 in price to yield 0.89 percent.
U.S. light sweet crude oil rose $4.02 to $52.41 a barrel.
Gold accelerated losses after British Prime Minister Gordon Brown said the G20 countries will ask the IMF to bring forward gold sales to finance help for the poorest.
Spot gold prices fell $24.75 to $901.65 an ounce.
Overnight in Asia, stocks shot to a three-month on hopes the U.S. downturn has bottomed.
Japan's Nikkei share average <.N225> rose 4.4 percent while the MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> firmed 5.8 percent after the G20 news.