A European agreement to bail out Spain's banks sent stock markets surging Monday, but analysts warned that the deal doesn't solve all of the continent's problems, and the goodwill could be short-lived.
Finance ministers from the 17 countries that use the euro said they were willing to lend Spain up to €100 billion ($125 billion) after Madrid said it would need help to shore up banks felled by bad real estate loans. Spain has not said exactly how much of that it will tap, but markets were cheered by the fact that it was finally owning up to needing help.
In Europe, France's CAC-40 rose 2.1 percent to 3,115, while the DAX in Germany surged the same rate to 6,262. The FTSE index of leading British shares was up 1.3 percent to 5,508. Spain's Ibex rose by an even stronger 2.5 percent.
The euro, which had surged over the weekend on news of the Spanish aid deal, gave up some of those gains, trading 0.5 percent lower at $1.2576 on Monday.
Asian stocks gained ground earlier in the day following better-than-expected data on the weekend that showed China's exports jumped in May from a year earlier.
Japan's Nikkei 225 index climbed 2 percent to close at 8,624.90. South Korea's Kospi added 1.7 percent to 1,867.04 and Hong Kong's Hang Seng added 2.4 percent to 18,953.63. Stock market benchmarks in Singapore, Taiwan, mainland China, Indonesia and New Zealand also rose.
"The decision to grasp the nettle looks set to be greeted positively by the markets for the time being, but it is likely to be no more than a relief pop," said Michael Hewson, an analyst at CMC Markets. "The decision by Spanish PM Rajoy to acquiesce to the inevitable and request help for Spain's ailing banking sector at the weekend is the first sign of an acknowledgment of the problems facing the Spanish economy, but the fact it took so long in the face of so much denial remains a problem with respect to the credibility of the Spanish administration."
With Spain taken care of for the moment, investors will now turn their attention to the thornier issue of Greece, where voters head to the polls this coming weekend in an election likely to determine whether the debt-mired country will stick with the common currency. If Greece leaves the euro, that will raise questions of whether other countries might, too.
The Spanish rescue plan also doesn't address other critical issues.
Take Italy, for example: government debt in the third-largest euro economy continues to pile up as its economic growth stagnates. Some fear it is only a matter of time before Italy becomes the next country to ask for rescue money.
"I think it's only a brief respite for the markets," said Tom Kaan of Louis Capital Markets in Hong Kong. "The €100 billion bailout is hopefully setting up a firewall against a much worse deterioration. Here we are, saving the banks. But what is next?"
The rise in equities also drove oil higher. Benchmark oil for July delivery was up 92 cents $85.02 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson contributed to this report from Bangkok.