Markets jump on Europe debt deal

Markets surged on Friday after news of a breakthrough on Europe's sovereign debt crisis. Bloomberg reports the market action:

Global stocks and the euro surged the most this year, oil had its biggest gain since 2009 and Spanish bonds rallied after European leaders reached an agreement that eased concern banks will fail.

The MSCI All-Country World Index climbed 3 percent, the most since November (MXWD), while the Standard & Poor’s 500 Index advanced 2.5 percent to cap its best June since 1999. The euro appreciated 1.7 percent against the dollar and rallied as much as 2 percent, the most since Oct. 27. Spain’s two-year yield plunged more than a full percentage point. The S&P GSCI gauge of 24 commodities rose 5.6 percent, its biggest gain since April 2009, as oil surged 9.4 percent to $84.96 a barrel.

Reuters reports some details of the agreement.

Under pressure to prevent a catastrophic breakup of their single currency, euro zone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states.

They also pledged to create a single banking supervisor for euro zone banks based around the European Central Bank in a landmark first step towards a European banking union that could help shore up struggling member Spain...

In a key concession by EU paymaster Germany, the leaders agreed to waive the ESM's preferred creditor status on lending for Spanish banks, removing a key deterrent to investors buying Spanish government bonds, who feared having to take the first losses in any debt restructuring.

Economic reports on Friday were mixed.

German retail sales fell 0.3 percent in May but French consumer spending rose 0.4 percent.

In Japan, the Markit/JMMA manufacturing PMI fell to 49.9 in June from 50.7 in May. May data released on Friday showed that industrial production fell 3.1 percent while consumer prices excluding fresh food fell 0.1 percent May from a year ago.

However, the unemployment rate also fell to 4.4 percent in May from 4.6 percent in April while housing spending rose 4.0 percent in May from a year ago, improving from the 2.6 percent increase in April.

In the US, consumer spending stalled in May but personal income rose 0.2 percent. The Thomson Reuters/University of Michigan consumer sentiment index fell to 73.2 in June from 79.3 in May but the Institute for Supply Management-Chicago's business activity barometer increased to 52.9 from 52.7 in May.