US stocks opened sharply higher today as optimism about corporate earnings offset concerns about a meeting of European leaders to tackle the region's debt crisis.
The Dow Jones industrial average was up 154.77 points, or 1.32 per cent, at 11,861.39. The Standard & Poor's 500 Index rose 13.87 points, or 1.13 per cent, at 1,242.92. The Nasdaq Composite Index gained 27.63 points, or 1.05 per cent, at 2,666.05.
Stocks were also lifted by the news that Germany's lower house of parliament has approved a plan to increase the capacity of the European bailout fund, sending Chancellor Angela Merkel to Brussels with a mandate to clinch a plan to enhance the European Financial Stability Facility.
Market expectations that EU leaders will come up with a comprehensive solution to the debt problem have dipped as political wrangling ahead of the meeting has continued.
While there appears to be broad consensus on the need for around €110 billion to be injected into the European banking system to help it withstand a potential Greek debt default and wider financial contagion, there is little clarity on two other critical parts of the package.
Those are how to scale up the region's rescue fund and how much of a loss private bondholders will take on Greek debt.
"They can't quite pull the rabbit out of the hat yet, though they will probably get something better over time," said Lothar Mentel, chief investment officer at Octopus Investments.
He suggest that markets would react badly to any failure to come up with a plan, but there was no early sign of that.
Bank of America-Merrill Lynch said there was scope for a tactical stock rally even if the EU summit disappoints because investors are holding a lot of cash and are bearishly positioned.
The euro inched higher versus the dollar, with analysts saying that the fact it remained within sight of a six-week high of $1.3959 hit in the previous session showed many investors were still hoping for a positive summit outcome.
The dollar reversed earlier losses to sit flat against a basket of major currencies . It has lost nearly 5 per cent against the basket since a high at the beginning of October.
Core German debt was a bit stronger, pending news from the EU summit.
"What Europe needs is a clear, quick-to-implement and easy-to-fund solution ... (T)here is a clear risk that we get a vague plan with no specific timetable and specific numbers," Lloyds TSB said in a note.
Assets perceived as safe-haven such as gold and the yen firmed, and the euro steadied, but the growing financial strains dampened Asian credit markets.
Agencies
