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Euro debt deal injects confidence

GLOBAL markets were given a shot of confidence as Europe took a big step towards developing a solution for its financial problems, however business leaders and investors cautioned it was still some way off before the troubled region would be in the clear.

GLOBAL markets were given a shot of confidence as Europe took a big step towards developing a solution for its financial problems, however business leaders and investors cautioned it was still some way off before the troubled region would be in the clear.

Equities markets rallied from London to New York, although a rally on the Australian sharemarket that began on Thursday ran out of steam with stocks closing marginally higher.

"Obviously the markets have been very focused on Europe in recent times and certainly the way they've responded in the last 24 hours give you a feeling they're satisfied with what they've seen come out of Europe to date," the chief executive of Macquarie Group, Nicholas Moore, said.

"Given the market was looking for [this solution], it has responded well towards it and we can be hopeful. But of course we're unsure in knowing where we're going to end up."

Even after yesterday's flat performance it has been the best week for the ASX in more than two years. The 5.1 per cent weekly gain is the biggest since July 2009, when the market was climbing back from the depths of the global financial crisis.

Australia's benchmark S&P/ASX 200 index ended the day 5.1 points higher at 4353.3 - a gain of just 0.1 per cent.

The Australian dollar surged as much as US4? to an eight-week high, even as expectations spread the Reserve Bank could cut cash rates on Tuesday. The Australian dollar was last night trading at US106.7?, after climbing through the US107? mark.

European leaders this week announced a plan to shore up their bailout facility, pledging new funds for Greece and persuading banks to agree to major write-downs. As part of the plan, euro zone leaders agreed to leverage the ?440 billion ($584 billion) European Financial Stability Facility to ?1 trillion.

While equities rallied, some bond and credit markets barely reacted to the Europe plan, suggesting doubts that this week's agreement will be a long-term solution for the region's substantial debt problem.


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