Hopes that policymakers are preparing a grand plan to finally contain Europe's debt crisis bolstered stocks Tuesday ahead of a meeting between the leaders of Greece and Germany.
Though investors appear to be clutching at the idea that Europe is preparing a three-pronged strategy to get a grip on the crisis, they remain aware that previous bouts of optimism have faltered quickly.
If progress is not seen to be made, then the current rebound in investors' appetite for risk could dissipate. The talk in the markets is that the eurozone is preparing to allow Greece to default on 50 percent of its debts, and massively expand its rescue fund, the European Financial Stability Facility, and recapitalize the banks.
Investors will be keeping a close watch on comment from the eurozone as governments work to get their Parliaments to back measures to boost the eurozone's rescue fund. They are also watching what may emerge from a meeting later Tuesday between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou.
Greece appears to have done enough to convince its international creditors to get the next batch of money due from its euro110 billion ($149 billion) bailout facility, provided the country's lawmakers back a property tax later. Without the euro8 billion tranche, Greece faced running out of money to pay all its commitments by the middle of October.
The speculation in the markets is that policymakers are working on a plan to make sure this will be the last time that Greece will have to go through this current three-monthly inspection from debt inspectors. Britain's finance minister George Osborne said last weekend that the euro countries have six weeks at most to save the euro.
As such, the indication is that the meeting of the leaders of the Group of 20 leading industrial and developing nations will sign off on a Greek default at their Nov. 6 meeting in the French chic resort of Cannes.
"On good days, equities look cheap and we put our faith in Angela Merkel, and on bad days, we look into the gates of eurozone hell," said Louise Cooper, markets analyst at BGC Partners.
Tuesday appears to be heading to be one of those good days and a strong performance in Asia has followed with a perky performance in Europe and the U.S. The euro has also returned to favor.
In Europe, Germany's DAX was up 4.4 percent at 5,577 while the CAC-40 in France rose 4.2 percent to 2,978. The FTSE 100 index of leading British shares was 3.3 percent higher at 5,255.
In the U.S., the Dow Jones industrial average was 2 percent higher at 11,269 while the broader Standard & Poor's 500 index rose by the same rate to 1,186.
U.S. stocks brushed off a fairly tepid consumer confidence survey. The 0.2 point rise in the Conference Board's main September index to 45.4 was below expectations for an improvement to 46. August's reading was particularly bad since it came in the wake of the long-winded debate to raise the U.S. debt ceiling, which eventually led to Standard & Poor's downgrade of U.S. debt.
"Consumer confidence remains very fragile as the economy remains on stall speed and recession probabilities rise," said Jennifer Lee, senior economist at BMO Capital Markets.
Earlier in Asia, Japan's Nikkei 225 shot up 2.8 percent to close at 8,609.95, a day after shedding more than 2 percent and ending at its lowest level since April 2009. South Korea's Kospi rallied 5 percent to 1,735.71. Hong Kong's Hang Seng jumped 4.2 percent to 18,130.55. Australia's S&P/ASX 200 index ended 3.4 percent higher at 4,004.60.
While stocks were in the ascendancy, the euro has benefited from a combination of hopes over Europe's debt crisis dealings as well as from the improved appetite for risk in the markets _ when investors are willing to take on risk, the euro usually gets supported against the dollar. It was trading 0.8 percent higher at $1.3622.
In the oil markets, prices rose on the back of the improved stock market tone. Benchmark oil for November delivery rose $3.05 to $83.29 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.