European and US stocks rallied with strong gains Wednesday as the leaders of France, Germany and Greece sought to demonstrate they were on top of Greece's debt crisis and would not let it fracture the eurozone.Although markets increasingly expect Greece to default on its debt despite international efforts, European stocks and the euro shook off increasingly dire warnings from officials that Greece's insolvency would cause chaos.
Europe's bourses closed sharply higher in advance of any news from the conference call between the leaders of Europe's two strongest economies and its weakest.
Frankfurt's DAX jumped 3.36 percent, Paris' CAC-40 climbed 1.87 percent and London's FTSE-100 rose 1.02 percent.Stocks in Italy and Spain, the eurozone's third- and fourth-largest economies which have come under pressure in the debt markets, both closed up 2.7 percent.
US stocks, which started the day with a slight dip, steadily climbed to finish with solid gains -- the Dow Jones Industrial Average added 1.27 percent; the broader S&P 500, 1.35 percent, and the Nasdaq Composite, 1.60 percent.
A statement released after the call said Sarkozy and Merkel "are convinced that the future of Greece is in the eurozone," and that Papandreou "confirmed his absolute determination to put in place all the necessary measures to carry out all of the commitments made."
Questions have been raised about whether Greece's government can meet the tough conditions attached to the 110 billion euro ($150 billion) European Union-International Monetary Fund bailout organized last year.
"We're highly focused on what's going on with Greece... and today you're getting some positive news, that's what is driving the market," Scott Marcouiller, a market strategist with Wells Fargo Advisors, said of the surge in US share prices.
"But the market continues to swing in wide ranges -- it will continue to (follow) the headlines depending on the European situation."The confidence in stock markets also infected foreign exchange traders, who gave the euro a push upwards.
At 2100 GMT the euro was up to $1.3750 from $1.3682 late on Tuesday, and had also picked up ground on the Japanese yen -- to 105.38 yen from 105.19 -- and the Swiss franc, buying 1.2049 francs up from 1.2038.Gold prices meanwhile fell, to $1,819.63 from $1,833.60 Tuesday.