Financial and energy stocks led the rally on Wall Street, which pushed the Dow industrials and the S&P 500 up 1 percent at midday. The Nasdaq Composite Index advanced 0.5 percent, matching the 0.5 percent gain in world stocks as measured by the MSCI index.

US crude oil futures jumped above $102 a barrel on concerns about supply a day after OPEC failed to agree on an increase in production targets.

The euro tumbled to a session low at $1.44777 om trading platform EBS and was trading at $1.4526 at midday.

The catalyst for the euro's fall was provided by the ECB, which left its 2012 inflation forecast unchanged at 1.7 percent, below some forecasts. The steady inflation view suggested the euro zone's pace of rate increases could slow.

As a result, investors pared back their outlook for total rate hikes to about 75 basis points over the next 12 months, from around 80 before Trichet's press briefing.

ECB President Jean-Claude Trichet did signal that rates would be raised again next month, but that move had already been widely expected and priced into the market.

On Wall Street, investors snapped up stocks on the view that the market was oversold after a six-day slide. An S&P index of financial stocks advanced 1.3 percent, while an S&P energy sector index also rose 1.3 percent.

The Dow Jones Industrial Average was up 116.51 points, or 0.97 percent, at 12,165.45. The Standard & Poor's 500 Index was up 12.10 points, or 0.95 percent, at 1,291.66. The Nasdaq Composite Index was up 12.66 points, or 0.47 percent, at 2,688.04.

Shares of Fusion-io Inc, which makes storage memory hardware and software for data centers, jumped 21 percent in their first day of trading. At midday, the stock was at $23 — up from its initial offering price of $19.

Stock investors viewed a narrowed US trade deficit as one positive point for growth in a recent avalanche of weak economic data. But the mood remained fragile with many analysts expecting the S&P 500 to retest its March 2010 lows after falling more than 6 percent since a peak in May.

"We're basically trading off technicals," said William Larkin, a portfolio manager with Cabot Money Management in Salem, Massachusetts.

"We're going to be in a very active trading range, and we just need a couple of key warnings — on consumer confidence, energy prices, whatever — and markets could continue to weaken."

The FTSEurofirst 300 index of top European shares advanced 0.9 percent to 1,104.43 points.

US Treasury yields fell to six-month lows after data showed initial jobless claims unexpectedly rose last week. The data added to recent evidence the recovery is stalling and stoked demand for safe-haven debt.

Benchmark 10-year notes were trading with a yield of 2.98 percent. The yield dipped to 2.92 percent early on Thursday, marking the lowest since early December.

The US Dollar Index, which measures the dollar's performance rose against a basket of major currencies, was up 0.3 percent.

In the currency markets, the spotlight was on the euro, which sank after the ECB left its benchmark interest rates at 1.25 percent as expected.

Brent crude rose to a five-week high on Thursday. In London, ICE Brent for July delivery rose $1.35 to

$119.20 a barrel by 1:30 p.m. EDT (1730 GMT), after hitting a fresh session high of $119.72, the highest since May 5.

US crude was up $1.10 at $101.84, having earlier hit $102.44.

Spot gold hit a peak of $1,549.30 an ounce and was bid at $1,547.44 an ounce, against $1,536.80 late in New York on Wednesday.