Global stocks enjoyed their best day in more than two months on Thursday and the euro rebounded as the deadline on a Greek private debt swap passed with signs the deal would go through, sparing Greece a chaotic default.
Expectations of a solid U.S. payrolls report for February on Friday also fuelled appetite for oil and other growth-sensitive commodities and sparked selling of safe-haven U.S. and German government debt.
Greece closed a bond swap offer to private creditors on Thursday after clearing the minimum 75 percent threshold of acceptance to push the deal through, moving closer to secure 130 billion euros (108 billion pounds) 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 percent of creditors to take part in the deal. A Greek official said after the 8 p.m. British time deadline that the take-up on the offer had topped 85 percent. 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 1 a.m. (0600 GMT) on Friday before a conference call with euro zone finance ministers in the afternoon.
The MSCI world equity index surged 1.8 percent, its biggest one-day gain since January 3. The index was still down 0.8 percent on the week after logging its biggest drop in more than three months on Tuesday.
The Dow Jones industrial average was up 91.05 points, or 0.71 percent, at 12,928.38. The Standard & Poor's 500 Index was up 15.29 points, or 1.13 percent, at 1,367.92. The Nasdaq Composite Index was up 38.89 points, or 1.32 percent, at 2,974.58.
Back-to-back days of gains still left the three major indices in the red on the week.
Basic materials stocks led the advance on the S&P 500, rising 1.6 percent, while the financial sector was held back by insurers after the U.S. Treasury sold $6 billion (3 billion pounds) 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 percent, Societe Generale up 3.7 percent and Credit Agricole up 3 percent.
The FTSEurofirst 300 index of top European shares ended 1.5 percent 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 percentages, said Lauren Rosborough, senior foreign exchange strategist at Societe Generale in London.
The euro rose for a second day against the U.S. dollar on the optimism over the Greek debt deal and posted its best day against the greenback in two weeks. It last traded up 0.9 percent at $1.3269 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 favourable 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 percent 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 percent 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.
U.S. JOBS OPTIMISM PERSISTS
Risk appetite was also supportive a day ahead of the U.S. Labor 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 percent in February.
In oil trading, April Brent crude in London settled $1.32 higher, or 1.1 percent, to $125.44 a barrel after trading above $126 earlier. April U.S. oil futures in New York settled up 42 cents or 0.4 percent to $106.58.
Gold rose 1 percent to $1,700.39 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 U.S. 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 percent. German Bund futures for June last traded down 18 basis points at 138.38.
(Additional reporting by Ed Krudy, Julie Haviv and Robert Gibbons in New York, and Richard Hubbard and Neal Armstrong in London; Desking by Andrew Hay)