U.S. Markets

U.S. stocks surged and the Dow Jones Industrial Average pushed toward what would be its largest monthly percentage gain in a quarter century, as investors cheered an agreement reached by European leaders on a plan to resolve the euro zone's debt crisis.

The Dow was up 345 points, or 2.9%, at 12214 in late Thursday afternoon trading, moving above the 12000 level for the first time since early August.

The Standard & Poor's 500-stock index rallied 43 points, or 3.5%, to 1285, reentering positive territory for 2011. The Nasdaq Composite leapt 91 points, or 3.4%, to 2742. As part of the agreement aimed at resolving the euro zone's debt crisis, private investors will take a voluntary 50% write-down on sovereign Greek bonds, the firepower of the euro-zone bailout fund will be increased to about $1.4 trillion, and Greece will aim to reduce its debt to 120% of gross domestic product by 2020.

The euro surged and European markets powered higher following the debt pact. Alcoa, whose shares are sensitive to swings in the global economic mood, surged 10% to lead blue-chip stocks higher.

Bank of America gained 9.1%, and J.P. Morgan Chase added 8.4% to round out the top Dow stocks. Financial stocks were the S&P 500's strongest sector, rising 6.2%.

Materials stocks were also up 6%. All sectors in the S&P 500 rose. Thursday's mega-rally pushed major stock indexes toward a few historic milestones. With two sessions remaining in October, both the blue-chip Dow Jones Industrial Average and the S&P 500 were headed for its largest monthly percentage gain in a quarter century.

The Nasdaq Composite's October rally would be its largest in point terms since January 2001. In economic news, the government's initial report on third-quarter gross domestic product showed that U.S. growth accelerated over the summer, rising at an inflation-adjusted annual rate of 2.5% from July through September.

The gain was somewhat less than the 2.7% advance economists expected, but high enough to keep investors' positive momentum Thursday going. Other data showed little change in the weak U.S. employment market. Initial claims for unemployment benefits last week dropped by 2,000, to a seasonally adjusted 402,000 for the week ending Oct. 22.

European Stocks

European stocks surged Thursday, along with the euro, with bank issues firmly in the lead, as investors took comfort in a deal by euro zone leaders to stabilize the region's debt crisis.

The Stoxx Europe 600 index closed up 3.6% at 249.42. The U.K.'s FTSE 100 index rose 2.9% to 5713.82, France's CAC-40 index ended 6.3% higher at 3368.62 and Germany's DAX gained 5.3% to 6337.84. Under the agreement hammered out at the EU summit, the euro zone will provide Greece with another EUR100 billion in aid, while holders of Greek debt will be required to write off 50% of their holdings.

EU leaders also agreed to expand the firepower of the European Financial Stability Facility, to around $1.4 trillion. With the plans broadly in line with expectations, market participants attributed Thursday's sharp rally to relief that an agreement had finally been reached, as there had been fears discussions could remain ongoing.

Gains were across the board, but the banking sector, which has been hit hard recently due to its exposure to peripheral European debt, was the standout performer. Under the new measures announced, banks will be made to raise their core tier 1 capital ratio to 9%, leading to around EUR100 billion in additional capital for about 70 banks.

French banks, which have come under pressure for their exposure to Greek debt, fared particularly well. Societe Generale rose 23% and BNP Paribas closed up 17%. Meanwhile, the Stoxx Europe 600 banks index soared 8.9% to end at 149.02. Some well-received corporate news added to the upbeat tone.

Shares in Telefon AB L.M. Ericsson added 6.1% after the company announced it was selling its stake in handset maker Sony Ericsson to Sony Corp. Elsewhere, Bayer gained 7.1% after the chemicals and pharmaceuticals company confirmed its full-year guidance. Gross-domestic-product figures out of the U.S. also underpinned the buoyant mood.

Asia-Pacific Markets

Asian shares rallied Thursday after European leaders announced a deal for private holders of Greek bonds to take a voluntary writedown on the debt.

While most Asian markets were already trading higher before the European announcement, the gains accelerated following news of the Greek deal, with Hong Kong's Hang Seng Index climbing 3.3% to 19688.70 and Japan's Nikkei Stock Average rising 2% to 8926.54. South Korea's Kospi rose 1.5% to 1922.04.

The Shanghai Composite was the laggard among the major markets, rising just 0.3% to 2435.61. India's Sensex was closed for a holiday. European leaders said early Thursday that private-sector holders of Greek government debt will take a 50% writedown on the value of their bonds, and that the euro zone's financial rescue fund will be increased by as much as five-fold.

Banks saw especially robust gains following the news. In Tokyo, shares of Mitsubishi UFJ Financial Group Inc. rose 5.7%, Sumitomo Mitsui Financial Group Inc. gained 5.1%, and Nomura Holdings Inc. improved by 7.7%. In Hong Kong, the performance of financial shares was also affected by bank earnings. Agricultural Bank of China Ltd. climbed 6.6% after posting a forecast-beating 40% rise in third-quarter net profit late Wednesday. China Citic Bank Corp. jumped 7.5%, after it too beat expectations with a 41% increase in quarterly profit from a year earlier. But Bank of China Ltd. underperformed the Europe-inspired rally, advancing only 0.4% after its 9% profit rise fell well below analysts' projections. In Tokyo, shares of Olympus Corp. rose 23% following the resignation of its chairman Wednesday.

Base metals closed sharply higher on the London Metal Exchange Thursday, emboldened by optimism over the economic future of Europe. LME three-month copper led the gains, soaring 6.5% to a five-week high of $8,178.75 a metric ton before closing the session at $8,145/ton, up 6.1%. By the close, the red metal's gains over just one week stood at 21%.

Copper's gains were sparked by a wide lift in market confidence after euro-zone leaders agreed a plan to tackle the region's debt crisis in a marathon overnight meeting. Crude oil futures prices surged 4.2% Thursday to their highest level in nearly three months after a European deal on Greece's debt and data which showed the U.S. economy grew by its highest level in a year.

Light, sweet crude oil for December delivery on the New York Mercantile Exchange settled 4.2%, or $3.76 a barrel, higher, at $93.96 a barrel. That's the highest price since Aug. 1. ICE North Sea Brent crude was 2.9%, or $2.91 higher, at $112.08 a barrel, the highest level since Oct. 14.

Front-month Nymex crude ended with a 14-cent premium to the second month, in the fourth day of the market price structure known as backwardation.

Gold and silver futures rallied to a five-week high as optimism over the European debt deal and a weaker dollar fanned demand for a store of value assets such as precious metals.

The most actively traded gold contract, for December delivery, rose $24.20, or 1.4%, to settle at $1,747.70 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the highest settlement since Sept. 21. The most actively traded silver contract, for December delivery, rose $1.802, or 5.4%, to settle at $35.112 a troy ounce. This was the highest settlement price since Sept. 22.