World Stock Markets Bounce Back On Greece Bailout

Global stock markets bounced back on Friday after European Union leaders reached agreement on a long-awaited €120bn (£105bn) lifeline for Greece.

European leaders agreed on Thursday night to launch a fresh aid package for Greece following last year's €110bn bailout, assuming the recession-hit country passes an austerity package next week. Britain is to be spared from taking part in the rescue after leaders accepted David Cameron's argument that the bailout should be borne by the eurozone. Without the final tranche of last year's rescue – €12bn from the eurozone and the IMF – Greece would be broke by mid-July.

The FTSE 100 index in London rose 83 points to 5757.51 in early trading, a gain of 1.5%. On Thursday, it closed down 98.61 points at 5674.38 after downbeat comments on the state of the economy from the US Federal Reserve chairman, Ben Bernanke.

Most Asian markets were up, with the Nikkei in Tokyo gaining 0.85% to 9678.71 and Hong Kong's Hang Seng rising 1.7% to 22,132.01.

Brent crude oil rebounded by more than a dollar to $108.70 (£68) a barrel on Friday morning, after tumbling 6% on Thursday when the International Energy Agency announced the release of 60m barrels of emergency oil supplies on the market in an attempt to stem soaring petrol and other energy prices. US crude climbed to $92.34 a barrel.

The rescue will be provided by Greece's euro partners and the International Monetary Fund, meaning that Britain is exempt from the European part of the package. Germany had been insisting that the bailout should be partly funded by all 27 EU members, but backed off.

The chairman of the EU leaders' summit in Brussels, Herman Van Rompuy, emerged after late night talks to announce that, like last year's rescue, the second bailout for Greece would not involve any commitment from countries outside the eurozone.

Earlier this week, chancellor George Osborne told fellow EU finance ministers in Luxembourg that the UK could not be called upon. Cameron reiterated that message over dinner in Brussels.

Cameron said the UK would fulfil its financial obligations as a contributor to any IMF support – probably through €1bn in loan guarantees – but it could not be expected to prop up Greece via the European Financial Stability Mechanism, which commits all EU member states to provide loan guarantees to a member in economic difficulty.

A qualified majority vote of the 27 leaders could have pushed this through against Britain's opposition, but a European commission official said this would have been "too divisive".

A Downing Street source told PA: "This is the right outcome for the British taxpayer."