European stocks extend gains on debt hopes; DAX surges 3.74%

Investing.com - European stock markets extended gains on Monday, as market sentiment remained supported after a successful Belgian bond auction and amid signs of progress in tackling the euro zone’s debt crisis.

During European morning trade, the EURO STOXX 50 soared 4.25%, France’s CAC 40 climbed 4.21%, while Germany’s DAX 30 surged 3.74%.

Earlier Monday, Belgium successfully auctioned EUR2 billion of 10-year bonds in the country’s first debt auction since ratings agency Standard & Poor's downgraded the country’s rating by one notch on Friday.

Risk sentiment was also supported by speculation European Union leaders are moving closer to agreeing on a fiscal pact to halt the spread of the region’s debt crisis.

Belgian lender Dexia skyrocketed 11.59% after the country’s successful bond sale. S&P’s downgraded on Belgium last week had prompted six parties to reach an agreement on deficit reduction.

Elsewhere, financial stocks continued to surge, led by Dutch lender ING Group with shares soaring 9.22%. France’s BNP Paribas surged 9.14% and Societe Generale jumped 6.70%, while German lender Deutsche Bank saw shares climb 7.06%.

Meanwhile, French insurance group Axa was one of the day’s top gainers, with shares skyrocketing 10.62% after placing the bulk of its London-based employee benefits adviser Bluefin up for sale, in a move that could yield a price of more than GBP100 million, according to the Sunday Telegraph.

In London, FTSE 100 jumped 2.29%, as U.K. lenders continued to track their European counterparts higher.

Shares in Barclays surged 6.81% and the Royal Bank of Scotland soared 5.12%, while Lloyds Banking and Anglo American advanced 4.87% and 3.26% respectively.

The mining sector also extended earlier gains, as Rio Tinto and Bhp Billiton saw shares soar 4.42% and 4.31% respectively, while Xstrata and Kazakhmys climbed 3.62% and 5.47%.

Elsewhere, the Thomas Cook Group soared 22.53% after its banks agreed to provide a GBP200 million loan, giving Europe’s second-largest tour operator time to reorganize its business.

In the U.S., equity markets pointed to a sharply higher open. The Dow Jones Industrial Average futures pointed to a surge of 2.28%, S&P 500 futures signaled a 2.83% jump, while the Nasdaq 100 futures indicated a 2.45% increase.

Also Monday, the Organization for Economic Cooperation and Development warned that the spending cuts and tax increases set to take place following the congressional debt committee's failure and continued troubles in Europe could push the U.S. economy to the brink of recession.

Later in the day, the U.S. was to release official data on new home sales.