European stocks rallied and borrowing rates for Spain and Italy slid yesterday as markets hailed exceptional bond-buying measures from the European Central Bank aimed at fighting the debt crisis (see story below).

London’s FTSE 100 index of top companies closed up 2.11 per cent to 5,777.34 points, as traders also digested the Bank of England’s decision to keep record-low rates unchanged.

But other leading markets surged even further after the ECB announced a highly anticipated programme to ease sovereign borrowing prices.

In Frankfurt, the DAX 30 won 2.91 per cent to 7,167.33 points, while in Paris the CAC 40 rose by 3.06 per cent to 3,509.88 points. In Spain and Italy, currently the flashpoints of the debt crisis, Madrid stocks skyrocketed 4.91 per cent and Milan gained 4.31 per cent.

“The market very much appreciated that the ECB is ready to intervene in an unlimited fashion,” said Yves Marcais, trader at Global Equities.

“Above all, there were no surprises” given the high expectations, he added.

“Everything is beginning to fall into place.”

In foreign exchange deals, the euro dipped to $1.2575 from $1.2600 late in New York on Wednesday. The dollar rose to 78.91 Japanese yen from 78.38 on Wednesday.

“The ECB did not disappoint in its decision to start a vast bond purchase programme,” said Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast.

“While we had little doubt that such a programme would be announced, some of the details go beyond what we expected,” she said.

US stocks also surged higher after the ECB announcement and encouraging US jobs data.

The Dow Jones Industrial Average soared 1.82 per cent in midday trade, the S&P 500 index advanced 1.94 per cent and the tech-heavy Nasdaq jumped 2.03 per cent.

Spanish and Italian borrowing costs tumbled after the announcement.

The yield – or rate of return – on benchmark Spanish 10-year government bonds plunged to 6.030 per cent from 6.409 per cent on Wednesday, while the rate for comparable Italian bonds dropped to 5.261 per cent from 5.514 per cent.

The fourth-largest economy in the eurozone, Spain recently received a €100 billion rescue for its banks, while many analysts expect the country’s Government will soon have to request a bailout.

Asian stock markets closed higher yesterday, with Tokyo edging up 0.01 per cent, Seoul advancing 0.38 per cent and Sydney gaining 0.80 per cent.