Asian shares rise as Europe announces debt plan

Asian stock markets and the euro rose on Thursday as European leaders announced a deal to tackle the region’s crippling sovereign debt woes.

After 10 hours of painstaking talks in Brussels, banks holding some of Greece’s mountain of debt agreed to take a 50 percent “haircut” on their holdings, breaking a deadlock many hope will help end the two-year-old crisis.

The summit also established a deal that will force lenders to increase their defences to absorb any losses on the debt writedown, while more than doubling a rescue fund aimed at protecting other eurozone economies from Greece’s fate.

Tokyo rose 1.15 percent, Hong Kong added 1.74 percent by the break, Seoul was 0.89 percent higher and Shanghai added 0.39 percent.

Sydney, which was was unable to open for four hours due to a technical glitch, surged 1.78 percent when it eventually started.

The agreement by holders of Greek bonds to write down 50 percent of their debt -- more than double the 21 percent they agreed to at a summit in July -- will slash 100 billion euros ($140 billion) from the 350 billion euros that Greece owes.

Lenders agreed to the move after German Chancellor Angela Merkel and French President Nicolas Sarkozy broke off from long-running talks to speak directly to the head of the banking lobby.

There were fears that a deal would not be struck as banks held out for a 40 percent loss but they eventually agreed to the bigger writedown.

Convincing banks to erase billions in Greek debt is a key part of a grand deal leaders had pledged to deliver, along with the bank recapitalisation and beefed-up rescue fund.

The lenders had earlier agreed to a recapitalisation to protect themselves against a Greek writedown.

The declaration on recapitalisation, which came after a meeting of all 27 European Union members, lacked any details but sources said it would amount to 108 billion euros.

That had been contingent only on a full package being agreed to protect the euro.

Soon after the talks wrapped up, Sarkozy announced that the European Financial Stability Facility (EFSF) rescue fund would be increased to one trillion euros from the 440 billion agreed in July.

The EFSF, the main weapon against the crisis, has already been used to help Portugal and Ireland, and would be tapped in a new Greek rescue. However, it would be too small for bigger endangered economies, such as Italy and Spain.

Global powers, from the United States to Japan and China, had been pressing European leaders to come up with a lasting solution to the debt crisis before a G20 summit in France on November 3 and 4.

The crisis has sent markets spinning amid fears that it could spill over on to the global economy and lead to another financial meltdown.

In Tokyo, Olympus shares surged 22 percent a day after the camera maker’s under-pressure chairman and president resigned over a fee payments scandal.

The firm had lost more than 50 percent of its value since the sacking earlier this month of its British chief executive after he raised doubts over advisory fees tied to a series of buyouts.

On currency markets, the euro was higher, buying $1.3958 in Tokyo trade against $1.3908 late Wednesday in New York, while it rose to 106.22 yen from 105.98.

The dollar was at 76.08 yen, compared with 76.21 yen, after hitting a fresh post-World War II low of 75.71 yen in New York on Wednesday.

New York’s main contract, light sweet crude for delivery in December, gained $1.11 to $91.31 per barrel.

Brent North Sea crude for December delivery added 70 cents to $109.61.

By 0400 GMT, gold was up at $1,722.99 an ounce, against $1,713.50 late Wednesday.