Global financial markets surged on Monday after officials agreed to a $1 trillion emergency rescue package to avert a sovereign debt crisis in Europe from festering and engulfing the rest of the world.

A global measure of world equity performance gained 5 percent, with markets in France, Spain and Italy climbing around double digits. U.S. equity markets also jumped.

Asian stocks also rose after the European Union and the International Monetary Fund carved out an emergency rescue package of up to 750 billion euros ($1 trillion) to keep Greece's debt crisis from spreading through the euro zone.

The euro rose broadly, rebounding from last week's 14-month low, as corporate and peripheral debt yields narrowed sharply against benchmarks. The interbank costs of borrowing euro and dollar funds fell for the first time since April.

It's clear that (policymakers) have, at least for the time being, drawn a line under the liquidity concerns in Europe, said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. As a result, we've seen risk appetite return to the markets across different asset classes.

MSCI's all-country world equity index <.MIWD00000PUS> rose 4.6 percent, while its emerging market index <.MSCIEF> gained 4.3 percent.

The pan-European FTSEurofirst 300 <.FTEU3> leapt 6.4 percent, and U.S. benchmark equity indexes gained.

The Dow Jones industrial average <.DJI> was up 396.55 points, or 3.82 percent, at 10,776.98. The Standard & Poor's 500 Index <.SPX> was up 46.31 points, or 4.17 percent, at 1,157.19. The Nasdaq Composite Index <.IXIC> was up 101.29 points, or 4.47 percent, at 2,366.93.

The rescue package was on the scale of the $700 billion Troubled Asset Relief Program (TARP) launched by the United States to fend off the financial crisis of 2007-2009.

There were also measures by central banks to address funding strains and a European Central Bank plan to buy the region's government bonds.

A number of European central banks said they had already started.

The euro rallied from last week's 14-month low against the dollar. The single currency was up 1.7 percent at $1.2872, having fallen to $1.2510 on trading platform EBS last week.

The dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> off 0.72 percent at 83.844.

Against the yen, the dollar was up 1.75 percent at 93.16.

Spot gold fell to $1,183.85 in early trade as the package boosted risk appetite, diminishing the allure of this safe-haven asset, while commodity prices such as crude oil and industrial metals rose. U.S. oil prices rallied to above $77 a barrel and benchmark copper traded up.

U.S. light sweet crude oil rose $1.96 to $77.07 a barrel.

Spot gold prices fell $11.85 to $1195.90 an ounce.

In bond markets, the premiums investors demand to buy peripheral euro zone government bonds rather than German benchmarks fell.

The Greek/German 10-year bond yield spread narrowed sharply and the cost of insuring peripheral economy debt fell.

Liquidity in Greek bonds dried up last week with no trades going through.

The benchmark 10-year U.S. Treasury note was down 35/32 in price to yield 3.55 percent.

But concerns lingered whether the package can achieve long-term success as the root problems of dealing with mushrooming public deficits remain.

The headlines are all very impressive but the question marks are 'Is it executable?' and 'How is it funded?', said Charles Diebel, head of European rates strategy at Nomura.

(Reporting by Wanfeng Zhou, Burton Frierson in New York; Christopher Johnson, William James, Joanne Frearson in London; Writing by Herbert Lash)