World markets surge after Europe finds rescue plan

NEW YORK — Financial markets around the world stormed higher Friday after European leaders came up with a breakthrough plan to rescue banks, relieve debt-burdened governments and restore investor confidence.

The Dow Jones industrial average climbed 277 points, and the Standard & Poor’s 500 index had its best day of the year. Stocks advanced even further in Europe, in strong and weak countries alike.

The price of oil posted its biggest one-day increase in more than three years, and other commodities shot higher — signs of hope that a deal in Europe will remove a big barrier to a healthier world economy.

In Brussels, leaders of the 17 countries that use the euro appeared finally to have found a broad strategy to fight a debt crisis that has hounded European governments and world investors for three years.

The leaders agreed to pump money directly into stricken banks, let some countries tap into rescue money without submitting to stringent budget requirements and, later, tie European governments closer in economic union.

David Kelly, chief global strategist at JPMorgan Funds, said it was becoming clear that European leaders will compromise to solve the crisis. One of the biggest stock gains Friday came in Germany, which took a hard line in earlier negotiations.

“The whole language is positive here,” he said. “Every time they’ve stared over the cliff into the abyss of a euro breakup, they’ve realized it’s much wiser to get closer together.”

There was a sign immediately that Europe’s latest plan was working: The cost for the troubled government of Spain to borrow money on the bond market fell dramatically, by more than half a percentage point, to 6.34 percent.

Previous market rallies tied to progress in Europe have proved temporary. But for the day, at least, global stock markets were jubilant:

The Dow closed up 277.83 points, its second-best showing this year. The S&P 500 index soared 33 points, or 2.5 percent. The rally left the S&P a gain of 8.3 percent at the halfway mark for the year.

Some market analysts remained cautious. Uri Landesman, president of Platinum Partners LLC, a New York hedge fund, said he expects more sharp leaps and dives this summer as traders speculate about Europe’s future.

“This Europe thing is going to trade up and down based on the news of the day,” Landesman said.