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A trader looks at electronic boards at Madrid's stock exchange on June 29, 2012. The euro jumped nearly 2 per cent, oil prices soared and world stocks rallied on Friday after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain, in addition to directly recapitalizing regional banks. (Susana Vera/Reuters)
A trader looks at electronic boards at Madrid's stock exchange on June 29, 2012. The euro jumped nearly 2 per cent, oil prices soared and world stocks rallied on Friday after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain, in addition to directly recapitalizing regional banks. (Susana Vera/Reuters)

The close: Second quarter ends on high note Add to ...

Stocks surged on Friday, ending a disappointing quarter with big gains following an overnight agreement among European leaders to ease pressure on Spanish banks and further integrate their banking sector.

The Dow Jones industrial average closed at 12,880.09, up 277.83 points or 2.2 per cent. The broader S&P 500 closed at 1,362.16, up 33.12 points or 2.5 per cent. In Canada, the S&P/TSX composite index closed at 11,596.56, up 171.86 points or 1.5 per cent.

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The gains pare some of the losses endured by major indexes in the second quarter, which has been a volatile period for stocks as investors continued to shift their opinions over the global economy in general and the European sovereign-debt crisis in particular. The S&P 500 fell 3.4 per cent in the second quarter, the TSX fell 6.5 per cent, Germany’s DAX index fell 7.6 per cent and Japan’s Nikkei 225 fell 10.7 per cent

The mood definitely shifted to hope on Friday when the two-day meeting among European leaders yielded what could be a significant improvement to the region’s banking sector., though observers aren’t so sure it will have a meaningful impact on the overall debt crisis A single banking regulator, overseen by the European Central Bank, would replace the current network of 17 regulators and allow bailout funds to inject capital directly into Spanish banks, removing one source of stress on Europe’s financial system.

European markets welcomed the moves. The yield on Spain’s 10-year government bond dove to 6.25 per cent, down 60 basis points. The yield on Italy’s 10-year government bond fell to 5.79 per cent, down 38 basis points. (There are 100 basis points in a percentage point.) The yield on both bonds had recently risen to exceptionally high levels, raising concerns that government borrowing costs had become sustainable.

European stocks also rallied. The U.K.’s FTSE 100 rose 1.4 per cent and Germany’s DAX index rose 4.3 per cent.

Research In Motion Ltd. was left out of the North American rally, plunging 20.3 per cent in Toronto following the release on Thursday evening of disappointing financial results. Its quarterly loss was far bigger than expected, after accounting for one-time items, revenue sank more than 40 per cent over last year, BlackBerry sales missed expectations and the company delayed the release of its BlackBerry 10 until the first quarter of next year.

Commodity producers were among the big winners, after the price of crude oil jumped to $84.96 (U.S.) a barrel, up $7.27 or 9 per cent – marking its biggest one-day gain in more than three years. Suncor Energy Inc. rose 4 per cent.

Gold rose to $1,604.20 an ounce, up $53.80. Barrick Gold Corp. rose 2.5 per cent.

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