BRUSSELS - European leaders, in a significant step toward resolving the euro zone financial crisis, won an agreement from banks early Thursday to take a 50 percent loss on the face value of their Greek debt. The agreement was crucial to assembling a comprehensive package to protect the euro, which has emerged as a new source of global economic anxiety and has been keeping jittery financial markets on edge.

The markets rallied strongly on the news of the accord, which was achieved after nearly 10 hours of negotiations by European leaders, finance ministers and bankers at an emergency meeting in Brussels. Stocks rose 6 percent in France, 5.1 percent in Germany and 3.3 percent in Hong Kong. On Wall Street, shares surged 2 percent at the opening bell. The value of the euro, which cost $1.32 a few weeks ago when anxiety over its future stability was worsening, surged to $1.40 in European foreign exchange trading on Thursday.

Hopes were also boosted by the possibility that China, which has amassed enormous amounts of capital in its historic economic climb over the years, would play an active role in helping with Europe's financial rescue. President Nicholas Sarkozy of France spoke to his Chinese counterpart, Hu Jintao, on Thursday, although there was no word on precisely what was discussed, and the top executive of the euro zone's emergency bailout fund was scheduled to visit China on Friday.

Still, the optimism and relief that washed over the markets in the aftermath of the European announcement of the package obscured a host of technical questions about its implementation that have yet to be addressed. How those questions are dealt with, European officials and bankers said, could determine whether the Europeans have truly begun to restore confidence in the battered euro currency zone.

The accord was reached just before 4 a.m. after difficult bargaining. The severe reduction would bring Greek debt from its current level of 180 percent of gross domestic product down to 120 percent by 2020, a still enormous figure but more sustainable for an economy driven into recession by austerity measures.

The leaders agreed on Wednesday on a plan to force the Continent's banks to raise new capital to insulate them from potential sovereign debt defaults, and to more than double the lending capacity of their emergency bailout fund to $1.4 trillion in order to better protect Italy and Spain.

"The results will be a source of huge relief to the world at large, which was waiting for a decision," Mr. Sarkozy said.

David Fuller's view The market's verdict today provides further evidence that the Eurozone is past the nadir of its sovereign debt and bank insolvency crisis. All the widely publicised stories about 'a break up of the euro'; 'Greece being thrown out of the single currency'; 'Germany printing deutschemarks prior to abandoning the euro project' [sic], or 'Europe's Lehman moment for its banks' have proved to be unfounded for at least the foreseeable future.

Yes, we know that 'the devil is in the detail' of most political agreements, not least this one. Yes, we know that there are many unanswered questions starting with: how will the EU conjure up $1.4 trillion for the European Financial Stability Facility (EFSF), other than with smoke and mirrors? How will Europe's banks raise the $150 billion plus capital adequacy funds required? When will Italy's government live up to Berlusconi's paper pledges? How will Greece and other deeply indebted European economies grow?

We also know that it probably will take Europe at least a decade to earn its way out of this crisis. However, we can now largely dismiss fears of 'systemic risk from Euroland spreading to other countries, dragging down the global economy or even causing a global depression.'

I have put inverted commas around these widely aired fears because they are what markets have been discounting. Until this month, the bears have been in charge for a number of weeks. Bulls have either retreated to the sidelines or hunkered down in foxholes. Now they are returning, emboldened initially by indicators of extreme pessimism, some of which Fullermoney has posted since late September.

We saw a significant meltdown in August, with the help of high frequency trading. This month, a melt-up is underway fuelled initially by short covering and supported by plenty of cash on the sidelines, although investors are having to scramble due to HFT. Currently, this is the S&P 500 Index's best monthly gain since 1987. Technical action provides increasing evidence that the short, sharp cyclical bear market for leading stock market indices is over (see chart review below). Consequently, we are back in a cyclical bull phase, the duration of which will probably be determined by commodity price inflation once again.

Following a partial reset of commodity prices at somewhat lower levels, they have been rallying sharply this month as you can see from these charts of the Continuous Commodity Index (0ld CRB) (weekly & daily). If this feels like 'déjà vu all over again', you are right. We are fated, in this secular trend for the last decade and counting, to experience commodities as one of the best opportunities, before they become the next big problem once again.

(See Eoin's reviews of leading shares below.)