European stock markets rose and the euro climbed against the dollar Thursday following positive government bond sales by France and Spain despite last week's downgrades for the eurozone countries.
Sentiment was also boosted by positive US economic data overnight and International Monetary Fund plans to boost its coffers for crisis fighting, helping to offset some weak earnings news.
In European midday trade, the Paris CAC 40 rose 0.76 percent to 3,289.61 points and Madrid's IBEX 35 jumped 1.0 percent to 8,504.40.
Frankfurt's DAX 30 climbed 0.24 percent to 6,369.63 points and London's FTSE 100 grew 0.20 percent to 5,713.94.
The euro rallied to $1.2917 from $1.2862 late in New York on Wednesday.
"Strong and healthy demand (for French and Spanish debt) demonstrated how undisturbed the markets were by the recent S&P downgrade that deprived France its triple A rating," Gekko Global Markets trader Anita Paluch told AFP.
"It seems there is little concern when it comes to the perception of risk as the cost of borrowing for both nations have fallen. It proves the liquidity is abound and that Spain's efforts of easing the pressure on its finances is bearing its fruits and was well received in the markets too."
France on Thursday raised 1.5 billion euros in a medium- and long-term bond auction at lower rates than previous sales despite a credit rating downgrade last week, officials said.
The sale of four, 10 and 28 year bonds came after France earlier Thursday raised 7.965 billion euros in a short- and medium-term bonds, also at lower rates, in its first auctions since Standard & Poor's stripped the country of the top AAA rating.
France's rating downgrade that came last Friday could theoretically expose it to higher interest rates on its long-term bonds, although markets had already largely factored in their woes in previous auctions and banks.
Spain's borrowing costs also tumbled Thursday in an issue of benchmark 10-year bonds, a key part of a debt auction that raised far more money than first planned.
Spain, whose credit rating dropped two notches from AA- to A last week, sold a total 6.609 billion euros in the auction of four-, seven- and 10-year bonds -- well above the target of 3.5-4.5 billion euros.
"The biggest news of the morning is that the French and Spanish bond auctions attracted strong demand and yields fell, which is exactly what the EU wants to see," said Kathleen Brooks, an analyst at traders Forex.com.
The successful bond sales came a day after the IMF said it planned to add $500 billion to its war chest, a move understood to be aimed at stalling fallout from the eurozone crisis and preventing a global recession.
"The IMF news was certainly taken positively by the market because it's a step in the right direction, but it's going to be a long road," said Justin Gallagher, RBS head of sales trading and execution in Sydney.
Meanwhile on Thursday, it emerged that the IMF had given approval for talks on new rescue loans to Greece.
"After a waiting period of several weeks, the green light has been given for the country to submit to the IMF a request to begin procedures for the new programme," Greek Finance Minister Evangelos Venizelos told parliament.
Elsewhere on Thursday, investors digested a raft of trading updates, including from Europe's biggest retailer Carrefour.
Shares in the French supermarket giant slid 2.23 percent to 17.07 euros in midday Paris trade after Carrefour posted flat fourth quarter sales and said its 2011 operating profit could be up to a fifth lower than in 2010.