European stocks, euro rally on optimism for Greek debt

The euro bounced back above $1.32 with dealers shrugging off decisions by central banks the ECB and Bank of England to keep interest rates steady as expected.

London's benchmark FTSE 100 index jumped 1.18 per cent to 5,859.73 points, Frankfurt's DAX 30 rallied by 2.45 per cent to 6.834.54 points and in Paris the CAC 40 soared 2.54 per cent to 3,478.36 points.

In foreign exchange trading, the European single currency jumped to $1.3263 from $1.3148 late in New York on Wednesday and the dollar gained to 81.54 yen from 81.13 yen.

"Global equity markets are rallying in front of the deadline for the private-sector involvement in the Greek debt swap plan, reflecting an expectation that the deal will get done and that a disorderly default will be avoided," said Briefing Research.

Asian markets posted strong gains and Wall Street also traded higher, unbothered by a rise in US weekly jobless claims, since the pickup did not change the overall picture of an improving jobs market in the country.

The Dow Jones Industrial Average was up 0.47 per cent to 12,897.31 points in the first five minutes of trade.

The broad-based S&P 500 added 0.89 per cent to 1,364.61 points, while the tech-rich Nasdaq Composite rose 0.99 per cent to 2,964.90 points.

"Today everybody is waiting for Greece, in particular for the outcome of the ... debt swap deal," said Anita Paluch, a trader at Gekko Global Markets.

"As much as the last wave of pessimism was caused by the fears over whether the troubled country will default or not, most recent developments in this field substantiate to re-emerging confidence -- the number of creditors willing to commit (to the debt swap) looks promising to make the deal a binding one.

A Greek government source said enough private investors have agreed to take huge losses on their Greek sovereign bonds enabling the swap deal to go forward.

As bondholders continued to decide whether to swap their Greek debt at a steep loss ahead of a 2000 GMT deadline, a government source said that participation had already passed 75 per cent, the minimum level sought by Athens for the deal to go through.

"An announcement will be made at 0600 GMT on Friday on the official government site for the exchange (www.greekbonds.gr)," the finance ministry source told AFP.

But a statement by Finance Minister Evangelos Venizelos late on Thursday "could not be excluded", the official added.

The bond exchange aims to erase more than 100 billion euros ($130 billion) of the country's debt, which totals around 350 billion euros.

Greece would like to see 90 per cent of private creditors take part, and has said it will not go through with the deal unless at least 75 per cent do so.

As expected, the European Central Bank voted to leave its key interest rate unchanged at 1.0 per cent for the third month in a row after it pumped a record 529.5 billion euros ($701 billion) into euro area banks last week.

ECB President Mario Draghi called the operation and a similar one in December provided banks with a total of more than 1.0 billion euros in low-interest loans to stimulate the economy an "unquestioned success".

However the ECB cut its forecast for eurozone growth this year to slight shrinkage of 0.1 per cent, but raised its projection for inflation in the 17 countries which share the euro to 2.4 per cent.

The Bank of England held its main interest rate at 0.50 per cent, and also maintained the level of its asset purchasing scheme aimed at boosting lending among commercial banks -- at £325 billion (388 billion euros, $514 billion).

Asian shares also posted sharp gains on Thursday, with Tokyo jumping 2.01 per cent, Sydney 0.66 per cent, Seoul 0.94 per cent, Hong Kong 1.32 per cent and Shanghai 1.06 per cent.