US Stock Futures Soar on Europe Debt Deal

German Chancellor Angela Merkel shakes hands with Czech Prime Minister Petr Necasat at an EU summit in Brussels, Oct. 26, 2011, whiole France President Nicolas Sarkozy looks on. Geert Vanden Wijngaert/AP Photo

Stock futures soared before the open early this morning after Europe leaders announced a deal to handle Greece’s debt, removing a cloud that has hung over world financial markets most of the year.

At 7 a.m. Dow Jones industrial average futures were indicating an open at least 200 points higher. Overnight Japan’s Nikkei surged 2 percent, and the German Dax rose 4 percent. Oil prices rose above $92 per barrel and the euro gained strongly, easing worries that the currency would fall apart without a debt deal.

European leaders clinched a deal Thursday that is hoped with end the two-year debt crisis, agreeing after a night of tense negotiations to have banks write down a 50 percent slice of Greece’s debts and to set up a $1.4 trillion rescue fund for other ailing economies in the region, including Italy, Spain and Portugal.

“We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis,” French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. “Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide.”

After months of dawdling and disagreement, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling, the Associated Press reported.

The strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece’s debts, a shoring up of the continent’s banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a euro1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

Greece was the sticking point in the talks, with Europeans facing a tough choice: Bail out the country, whose debt had soared to 180 percent of its GDP, or allow it to default on its euro-based bonds, leading to a likely collapse of the currency shared by 17 nations.  The plan calls for bringing down Greece’s debt to 120 percent of its GDP.  By comparison, the US’s national debt is 84 percent of GDP, Germany’s is 74 percent and France’s is 87 percent.

The Associated Press contributed to this report.