Spain's and Italy's bond yields eased significantly while European bank stocks surged as investors showed relief at finally receiving detailed proposals from the European Central Bank on its bond-buying plans.
ECB President Mario Draghi announced there will be sterilized bond purchases with maturities of between one and three years, which will be known as Open Market Transactions. It was also confirmed that the ECB won't hold seniority on bonds it purchases, which is likely to avoid any panic in the bond markets.
In the European afternoon, Spanish 10-year yields traded at a three-month low of 6.04% compared with 6.09% before the conference started and down 0.34 percentage point on the day. Two-year Spanish yields also eased to 2.87% from 2.94% beforehand, according to Tradeweb. Italian bonds gained, with the yield on 10-year Italian bonds falling to 5.32%, down 0.18 percentage point on the day. Yields on shorter-dated Italian bonds also fell, with the two-year bond quoted at 2.32%.
German Bunds also fell sharply as the ECB outlined its bond-buying plan, with the December Bund futures contract sliding to as low as 140.27 compared with 141.40 at the close on Wednesday.
"The next stumbling block will come when the countries request aid which, as Draghi said, will come with strict conditions. There is likely to be long negotiations over these conditions with [Spanish Prime Minister Mariano] Rajoy and [Italian Prime Minister Mario] Monti unwilling to take anything too severe given the harsh cuts and reforms already undertaken in both countries," said Alpari U.K. market analyst Craig Erlam.
Among stocks, Italy and Spain were again the standout markets. Spain's IBEX 35 was up 3.8% and Italy's FTSE Mib gained 3.7%. Greece's ASE Composite had been choppy but was recently up 0.7%.
Regionally, the U.K.'s FTSE 100 index was up 1.6%, France's CAC 40 was up 2.6% and Germany's DAX was up 2.5%.
However, the euro fared less well. The single currency was at $1.2566 from $1.2600 late Wednesday in New York. Before Mr. Draghi had begun his news conference, the euro had hit a two-month high of $1.2652.
The Dow Jones Industrial Average was up 1.5% and the S&P 500 was up 1.5%.
In commodities, October Nymex crude oil futures were up $1.80 at $97.16 a barrel and the October Brent oil contract was up $1.25 at $114.33. Spot gold was at $1,701.00, up $8.10. The yellow metal pared gains following the strength in the dollar.
—Neelabh Chaturvedi contributed to this article.
