In Europe, the FTSE 100 index of leading British shares closed up 49.77 points, or 0.9 percent, at 5,727.65 while Germany's DAX rose 93.95 points, or 1.6 percent, at 6,132.95. The CAC-40 in France was 50.67 points, or 1.2 percent, at 4,000.48.
Meanwhile, US stocks more than made up Wednesday's losses - the Dow Jones industrial average was up 101.42 points, or 0.9 percent, at 10,937.57 around midday New York time, while the broader Standard & Poor's 500 index rose 11.09 points, or 1 percent, at 1,178.81.
The main focus in the markets is on Brussels where EU leaders are deciding whether to offer Greece some sort of rescue package and whether any deal involves the International Monetary Fund.
The growing talk coming out of Brussels is that German Chancellor Angela Merkel is likely to prevail by linking bilateral loans from eurozone countries to Greece with an IMF loan.
Analysts are hoping that something will emerge after months of uncertainty, even though German Chancellor Angela Merkel has been reluctant to stump up German cash to support Greece - however Merkel does not want to see the euro continue to founder.
“If Germany's Merkel can be persuaded to fall into line with the rest of the EU leaders and agree to come to Greece's aid sooner rather than later, this should alleviate concerns over eurozone economies and ease pressure on global indices - whether the German public will share in the upbeat mood is a different matter entirely,” said Philip Gillett, sales trader at IG Index.
Expectations that something will likely emerge later was evident in the currency markets where the euro won some much-needed respite following its descent to a ten-month low of $1.3285 earlier - by late afternoon London time, the euro was 0.2 percent higher at $1.3341.
Though a deal could shore up confidence in currency markets by eliminating uncertainty, investors are likely to be unsettled at any IMF involvement - IMF help would be a glaring admission the eurozone cannot steer out of the crisis with the rules currently at its disposal.
In addition, Europe's debt problems are unlikely to go away - earlier the People's Bank of China's vice governor Zhu Min said the Greek debt crisis was the “tip of the iceberg.” “This comment might well signal the point that we stop talking about a 'Greek debt crisis' and start talking about a eurozone structural crisis' instead,” said Neil Mellor, currency strategist at Bank of New York Mellon.
“In other words, the issue is no longer about Greek profligacy per se - in our opinion, it never has been - but, rather, about how the eurozone actually functions,” added Mellor.
The pessimistic comments out of China came after Fitch Ratings downgraded its view on Portugal's sovereign debt because it said the country's prospects for recovery were weaker than its peers in the eurozone. Though Portugal's debt rating was reduced by one notch to AA-, the country is still considered investment grade and a better bet than Greece for now.
The euro was further buoyed Thursday by the news that the European Central Bank will continue to accept lower-rated government bonds as collateral for loans to banks into 2011.
If it reverted to its previous collateral regime as it planned at the end of this year, then Greece could have been in the position where its bonds would not have been accepted by the European Central Bank.
The ECB has been accepting debt rated from BBB- or above since the peak of the financial crisis - but a return to taking only A-grade debt could have spooked markets and caused them to shun Greek bonds.
Jane Foley, research director at Forex.com, said the move has eased some of the pressure on the euro by removing from credit ratings agency Moody's Investor Services “the power to decide whether Greek sovereign debt can carry on being eligible as collateral.” Of the three main agencies, only Moody's rates Greek debt in the A sphere.
The rally on Wall Street was further helped by figures showed a bigger than expected drop in the number of first time jobless claims in the US last week - the Labor Department said the number of claims dropped by 14,000 to a seasonally adjusted 442,000, above market expectations of a more modest decline to 450,000.
The drop has stoked hopes that next Friday's US nonfarm payrolls data - often a key driver of stock market performance - may also be better than expected, further solidifying optimism about the US economy.
Earlier in Asia, Hong Kong's Hang Seng index slid 230.07 points, or 1.1 percent to 20,778.55, while Japan's benchmark Nikkei 225 stock average edged up 13.82, or 0.1 percent, to 10,828.85.
Australia's main index was off 0.1 percent while South Korea's Kospi gained 0.4 percent to 1,688.39.
Benchmark crude for May delivery rose 61 cents to $81.22 a barrel in electronic trading on the New York Mercantile Exchange.
