Debt Crisis: European shares soar on hopes leaders will hammer out deal to ease chaos
EUROPEAN shares soared higher today on hopes that politicians could hammer out a deal to ease the eurozone debt crisis by next week.
A Sunday deadline for decisive action is now unlikely to be met, but traders gambled that a second meeting of European leaders next week will deliver radical measures to shore up the region's financial system.
The FTSE 100 index jumped by almost 2pc or 103 points, its highest closing level since early August, while other European stock markets also rose strongly with the CAC 40 in France and the Dax in Germany rising by 2pc and 3pc respectively.
European financial ministers are meeting this weekend and possibly again next week.
Talk of disagreement between France and Germany over terms of any plan had spooked investors but the mood changed today after reports that respective leaders Nicolas Sarkozy and Angela Merkel are close to agreement on a plan to be tabled at the meetings.
That could involve an expansion of the €440bn eurozone bailout fund to well over €1 trillion to give it more firepower to lend to struggling economies and help restore confidence in banks.
Banks were among the biggest risers
Yusuf Heusen, sales trader at IG Index, said: "The (British) market is holding quite resolutely around the 5,400 level, when arguably there could have been a strong case for simply pulling money off the table, given the uncertainty that seems to lie ahead."
But he warned that current market rises could be the "calm before the storm" because more falls are on the cards if the markets are not satisfied that any new measures will be sufficient to deal with the crisis.
Markets have fluctuated wildly in recent months amid fears that Greece and possibly other eurozone nations could default on their debts, which could trigger another banking crash and tip the world economy back into recession.
The problem has been made worse as economic growth slowed across Europe, making it harder for countries to keep up with their debt repayments and heightening fears of a default.
This weekend's meeting, which had already been delayed by a week, was initially expected to draw up comprehensive measures to solve the problem and finally restore confidence to the markets.