Global stocks were on track for their best day in nearly two months on Thursday and the euro rebounded as the deadline on a Greek private debt swap passed with signs that the deal would go through, sparing Greece a chaotic default.
Expectations of a solid US payrolls report for February on Friday also fueled appetite for oil and other growth-sensitive commodities and sparked selling of safe-haven US and German government debt.
Greece closed a bond swap offer to private creditors on Thursday after clearing the minimum 75% threshold of acceptance to push the deal through, moving closer to secure 130 billion euros in funds it needs to avert a default.
"By Greece avoiding a disorderly default it will remove a key risk hanging over the markets over the next few weeks," said Dan Dorrow, director of research at Faros Trading in Stamford, Connecticut.
Greece aims to persuade 90% of creditors to take part in the deal. A Greek official said after the 2000 GMT (0130 IST) deadline that the take-up on the offer had topped 85%. Greece said that a two-thirds acceptance could allow it to trigger collective action clauses and force other bondholders to accept losses.
Preliminary results from the offer are expected to be announced officially at 0600 GMT (1130 IST) on Friday before a conference call with euro zone finance ministers in the afternoon.
The MSCI world equity index rose 1.7%, its biggest one-day gain since January 3. The index was still down 0.7% on the week after logging its biggest drop in more than three months on Tuesday.
In late afternoon trading, the Dow Jones industrial average was up 91.05 points, or 0.71%, at 12,928.38. The Standard & Poor's 500 Index was up 15.29 points, or 1.13%, at 1,367.92. The Nasdaq Composite Index was up 38.89 points, or 1.32%, at 2,974.58.
Basic materials stocks led the advance on the S&P 500, rising 1.7%, while the financial sector was held back by insurers after the US Treasury sold $6 billion of its shares in AIG.
European shares rallied, reversing half the losses suffered earlier in the week.
Shares of banks, the main holders of Greek debt, were among the top gainers, with Deutsche Bank up 4.4%, Societe Generale <SOGN.PA> up 3.7% and Credit Agricole up 3%.
The FTSEurofirst 300 index of top European shares ended 1.5% higher at 1,074.79 points.
"Today's moves suggest the market is moving back to risk-on mode, but there is event risk surrounding the Greek debt swap%ages," said Lauren Rosborough, senior foreign exchange strategist at Societe Generale in London.
The euro rose for a second day against the US dollar on the optimism over the Greek debt deal and was set for its best day against the greenback in a month. It last traded up 1% at $1.3281 near a global session peak of $1.3291.
"Any holdups in the deal or a messy legal battle would risk Athens not getting its 130-billion-euro bailout in time to meet its upcoming bond payments on March 20," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"The uncertainty has hurt the euro this week and, even in the event of a favorable outcome today, should continue to limit the euro's upside going forward."
The dollar index, which measures the value of a basket of major currencies against the greenback, was down 0.8% at 79.11 after hitting a three-week high on Wednesday.
As traders awaited the final tally on the Greek debt swap, the European Central Bank cut its forecast on euro zone growth, forecasting the region's economy could contract by 0.5% this year.
Even with the risk of a recession, ECB President Mario Draghi said there are signs of stabilization in the 17-nation bloc's economy now that the ECB has pumped more than a trillion euros in three-year funds into the banking system since December.
US Jobs Optimism Persists
Risk appetite was also supporting a day ahead of the US Labour Department's monthly jobs report.
Nonfarm employment is expected to have increased by 210,000 last month, according to a Reuters survey, after rising by 243,000 in January. The unemployment rate is seen holding at a three-year low of 8.3% in February.
In oil trading, April Brent crude in London settled $1.32 higher, or 1.1%, to $125.44 a barrel after trading above $126 earlier. April US oil futures in New York settled up 42 cents or 0.4% to $106.58.
Gold rose 1.1% to $1,702.70 an ounce as hopes of a Greek debt swap deal rekindled appetite for the precious metal. Spot bullion prices fell to a six-week low earlier this week.
The US 10-year Treasury note ended near its session low, last traded down 14/32 at 99-26/32 in price with a yield of 2.02%. German Bund futures for June last traded down 18 basis points at 138.38.
