European and US shares rose today with intense speculation over a eurozone banking recapitalisation plan and an orderly Greek default, though lack of details kept trading extremely volatile.
The euro was range-bound amid growing signs the eurozone debt crisis could further damage the faltering global economy. Asian equities fell sharply earlier today.
"Weekend press reports ... suggest that EU policymakers are looking at a three-pronged plan which involves leveraging the firepower of the EU's rescue fund up to 3.0 trillion euros, a recapitalisation of vulnerable eurozone banks and an orderly Greek debt default," said VTB Capital economist Neil MacKinnon.
"However, the financial markets remain nervous as evidenced by the weakness of Asian equity markets overnight, a $100-drop in the gold price at one point this morning and further pressure on the euro."
In early afternoon trade, the London stock market was up 0.88 percent, Paris rallied 1.37 percent and Frankfurt soared 2.56 percent. Madrid gained 2.19 percent and Milan rose 3.02 percent.
US stocks opened higher after posting their worst week since October 2008.
The Dow Jones Industrial Average rose 0.2 percent in the first minutes of trade. The broader S&P 500 advanced 0.76 percent, while the tech-heavy Nasdaq Composite gained 0.45 percent.
European equities had fallen sharply at the open but rallied on speculation that the French government was drawing up plans to re-capitalise the country's ailing banks amid persistent worries over their exposure to Greece.
The euro was flat at $1.3505, from $1.3503 on Friday, after sinking to $1.3363 in early trade. It was also stable against the yen at 103.07 yen after hitting a 10-year low at 101.94 yen in Asian trade.
The dollar slid to 76.38 yen from 76.50 last Friday.
The little hard data there was came from Germany where the closely-watched Ifo business climate index fell to its lowest level in more than a year, as companies become increasingly weighed down by the debt debacle in the eurozone.
Economists had been pencilling in an even steeper decline which helped explain the shares jump in Frankfurt.
Investors were unimpressed by a commitment from G20 finance chiefs that they would take strong action amid increasing fears that Greece will almost certainly default on its debts.
"European equities are stronger despite disappointment following the G20" meeting, said David Morrison, an analyst at GFT trading group.
"However, traders are piling back into banks and other financial stocks on hopes of a huge coordinated rescue package which will ring-fence Greece, Ireland and Portugal and prevent contagion to the rest of the eurozone.
But no details emerged and the "market is rallying on unsubstantiated rumours," Morrison added.
Greece faces a tough week with European Union and IMF experts expected to resume an audit of its progress in cutting the public deficit and reforming the economy.
The EU and IMF will decide whether to release the next slice of rescue funds without which Greece will be unable to pay its current bills beginning in mid-October.
"In spite of talk at the weekend that EU leaders are looking at expanding the size of the current bailout fund ... markets are likely to remain cautious, even if it appears that European leaders do appear to be finally grasping the fact that the current situation cannot go on forever," said CMC Markets analyst Michael Hewson.
On Thursday, the German parliament votes on whether to allow an expansion of the scope and size of Europe's bailout fund, the European Financial Stability Facility.
Once approved by all 17 eurozone members, it is hoped that the crisis would stop spreading to Spain and Italy, where any default could threaten the survival of the monetary union.
"Markets seem to be more confident that ... euro area finance ministers now at least recognise the need to come up with a more coherent and substantive response to their debt crisis," said Daiwa economist Chris Scicluna.
"Unfortunately, however, the markets are likely soon to realise that the euro area does not yet have such a plan," he said.