World stocks rallied and the euro bounced higher on Friday despite uncertainty over Greece and the eurozone as investors bet on fresh stimulus from major central banks to boost growth and fight the European crisis.
US markets capped a day of surprising gains, the S&P 500 adding 1.0 percent and the Dow 0.9 percent even as nervousness set in over the results of Sunday's vote in Greece -- which could decide whether it stays in the euro area or leave.
Earlier Europe's markets, most under threat from more eurozone turbulence, took larger jumps. The blue-chip Euro Stoxx 50 index gained 1.5 percent; the CAC 40 1.8 percent; the DAX 30 1.5 percent; and Milan shares 2.3 percent. London's FTSE was the underperformer among the majors, gaining only 0.2 percent.
Asian markets started the rally, following a mix of speculation and some clear signals that major central banks were readying intervention measures to forestall contagion from a Greek exit from the euro and to further ease money conditions to spark growth.
Late Thursday the Bank of England announced two new stimulus packages to help stimulate the economy and provide long-term support to banks.
Finance chief George Osborne and Bank of England governor Mervyn King said they would flood banks with billions of pounds in a bid to jump-start lending to households and businesses and fend off a potential storm from Europe.
European Central Bank chief Mario Draghi fueled speculation of an imminent rate cut or other measures, warning Friday of "serious downside risks" to the euro area economy while inflation saying was no threat.
Meanwhile, with more weak domestic economic data filtering through, hopes grew that the Federal Reserve would adopt further moves to stimulate the US economy when it meets on Tuesday and Wednesday.
"The prospect of coordinated central bank intervention from central banks next week in the event of turmoil caused by the result of this weekend's Greek elections has given equity markets a boost today, and calmed some rather frayed investor nerves," said Michael Hewson, senior market analyst at CMC Markets.
"Place your bets. Yesterday's and today's trading is all about positioning ahead of Sunday's elections in Greece and next week's Federal Reserve policy meeting," said Dick Green at Briefing.com.
Green said stocks rallied "because traders are betting that European governments will take action after the election to prevent any adverse credit market impact from the possibility of Greece leaving the eurozone.
The confidence sent the euro higher. At 2100 GMT the euro was trading at $1.2633, compared to $1.2630 late Thursday.
The confidence came even though polls showed Greece's far-left Syriza Party, which is threatening to scuttle the country's bailout with the possible consequence an exit from the euro, running neck and neck with the New Democracy conservatives who promise to stick with the tough bailout program.
"Never have the Greek people had such clear dilemmas," Prime Minister Panagiotis Pikrammenos said on Friday.
Despite the apparent confidence of investors, with Spain's borrowing costs pushing to record highs despite a 100-billion-euro bank bailout, traders remain on edge.
On Thursday the interest rate on Spanish 10-year government bonds soared to 6.9667 percent, close to the danger-zone 7.0 percent considered unsustainable to service debts.
The yield slid back to 6.838 percent on Friday, but the risk premium -- the difference in the rate between Spanish and safe-haven German 10-year bonds -- hit a new euro-era record of 5.54 percentage points as the yield on German bonds fell more.
The IMF said Friday that Spain will likely miss its budget-cutting deficit target for 2012 and it pushed Madrid to adopt broad reforms as it grabs a rescue line for stricken banks.