Hopes that Greece will get a second bailout boosted market sentiment around the world on Friday, a day after stocks and the euro plunged on fears over the pace of the global economic recovery.
Stocks, particularly in Europe, have recovered a large chunk of the losses posted on Thursday after EU leaders backed another bailout for Greece should the Parliament there approve euro28 billion in austerity measures in a vote next week.
"We agreed that there will be a new program for Greece," German Chancellor Angela Merkel said in Brussels.
The austerity measures have to be passed by the Greek Parliament for the next batch of money due from last year's bailout and for a second bailout to be agreed. If lawmakers fail to back the package, then Greece will face a default on its debts.
The markets are hopeful that Greece will get another financial lifeline from its partners in the eurozone and the International Monetary Fund to see it through the next couple of years. That has eased concerns over what impact a Greek debt default would have on Europe's financial system. Many analysts think a default could trigger mass panic in the markets, akin to what happened in the aftermath of the collapse of U.S. investment bank Lehman Brothers back in 2008.
"The EU and IMF backed Greece's austerity measures, reassuring markets that Greece will receive a bailout if George Papandreou manages to pass through his austerity bill next week," said Simon Furlong, a trader at Spreadex.
In Europe, the FTSE 100 index of leading British shares was up 0.9 percent at 5,726 while Germany's DAX rose 0.8 percent to 7,198. The CAC-40 in France was 0.8 percent higher at 3,821.
One market bucking the trend was Italy's FTSE MIB, which was trading 0.5 percent lower on the back of a retreat in banking shares. Intesa Sanpaolo Spa and Unicredit Spa were both down over 3 percent.
Wall Street was poised for a solid opening _ Dow futures were up 0.3 percent at 12,008 while the broader Standard & Poor's 500 futures rose a similar rate to 1,281.
The euro was down 0.3 percent at $1.4226 but that's still up just over a cent higher than the low it recorded Thursday, when investors' appetite for risk was battered. When investors' risk appetite is low, the euro usually suffers, especially against the dollar.
The crisis of confidence in the eurozone is likely to remain even if Greece gets a second bailout, with many economists predicting that the country will have to restructure its debts in some way in the coming years, especially if the economy shrinks further.
"Greece would be fully funded for some time to come of course; but then if the economy continues to deteriorate in the months ahead, investors are likely to begin to fear the worst fairly quickly in the knowledge that the political will to offer further assistance would be probably spent," said Neil Mellor, an analyst at Bank of New York Mellon.
Earlier, Asian markets rallied on the Greek bailout hopes.
Japan's Nikkei 225 was 0.9 percent higher to close at 9,678.71, while South Korea's Kospi rose 1.7 percent to 2,090.81.
Hong Kong's Hang Seng added 1.9 percent at 22,171.95, with banking shares getting a boost after Chinese Premier Wen Jiabao wrote a newspaper commentary indicating China is getting its inflation problem under control.
Mainland Chinese shares also gained on Wen's comments. The Shanghai Composite Index rose 2.2 percent, the biggest gain in four months, to 2,746.21, while the Shenzhen Composite Index gained 2.3 percent to 1,136.39.
Meanwhile, oil prices clawed back some ground lost on Thursday after the International Energy Agency said it will make 60 million barrels available over a 30-day period, half of which will come from the U.S. Strategic Petroleum Reserve. The shock decision sent oil prices tumbling by around 5 percent.
By late morning London time, benchmark oil for August delivery was up 76 cents to $91.78 a barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.