Markets were calmed Thursday by growing expectations that Greece will not be defaulting on its debts anytime soon and will get the next batch of rescue funds due from its international bailout package, according to AP.
Hopes that international creditors will release the next tranche of money due in October were raised by the outcome of a teleconference Wednesday between the leaders of France, Germany and Greece. The three leaders 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 stressed to Greek Prime Minister George Papandreou that the debt-crippled country needs to honor its commitments on making savings and enacting reforms. Papandreou renewed his commitments ahead of Thursday's Greek cabinet where the reform program will top the agenda.
Though the comments emanating from the discussion were fairly minimal, investors appear to have breathed a sigh of relief that Greece wasn't being set up for a default or a possible exit from the eurozone, which could wreak further havoc in markets.
"Markets are showing some signs of a relief rally but it could well be fairly short lived," said Michael Hewson, market analyst at CMC Markets.
In Europe, all stock markets were higher, while the euro pushed back up toward the $1.38 mark.
Germany's DAX was up 2.3 percent at 5,463 while France's CAC-40 rose 1.7 percent to 3,000. The FTSE 100 index of leading British shares was up 1.7 percent too at 5,319.
Wall Street was poised for a flat open following Wednesday's Greece-inspired late gains - Dow futures were down 5 points at 11,169 while the broader Standard & Poor's 500 futures fell around a point to 1,181.
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 ?110 billion bailout package.
Also, concerns over the passing of key anti-crisis measures across European capital remain, especially after Austria indicated Wednesday that it wouldn't be able to fast-track the plans announced at the July summit of 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.
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. As a result, 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 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.
Oil prices fell amid signs of sluggish U.S. consumer demand. Benchmark oil for October delivery was down 36 cents $88.54 per barrel in electronic trading on the New York Mercantile Exchange