With the 500-billion-euro ESM in place and a beefed-up European Central Bank ready to intervene massively on the markets, the EU's crisis fighting machinery is taking shape, and elicited positive response on the markets where borrowing costs for weaker eurozone states continued to fall.

For 10-year benchmark government bonds in Spain, widely touted as the next bailout candidate, the return dipped slightly to 5.60 percent, compared with record unsustainable highs above 7.60 percent in July.

When compared with safe German debt, the extra rate, or risk premium, charged on Spanish bonds fell below 4.0 percentage points for the first time since April.

The return on benchmark 10-year Italian government bonds slid to nearly 5.0 percent.

With banking shares buoyed by the decision, Germany's DAX 30 gained 0.46 percent to 7,343.53 points, while in Paris the CAC 40 ended up 0.18 percent at 3,543.79 points.

Madrid climbed 0.78 percent and Milan rallied 1.19 percent.

In foreign exchange deals, the euro was being traded above $1.29 for the first time for four months, reaching $1.2937 at one point. It later fell back to 1.2901, which compared with $1.2848 in New York late on Tuesday.

The German court ruling meanwhile came as an anti-austerity party was set to score big gains in Dutch elections and as EU leaders unveil plans for the first step towards a eurozone banking union.

Investors were also incorrectly looking towards the Federal Reserve, whose policy board is not expected to embark on fresh monetary easing measures as it meets Wednesday and Thursday to address a weak US economy and stagnant job creation.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service