European shares rallied and yields on euro zone government bonds tumbled on Tuesday after the new Greek government dropped calls for a write-off of its foreign debt.
The euro also nudged up but was overshadowed in currency markets by the Aussie dollarAUD=, which skidded after Australia unexpectedly cut interest rates.
In Athens, shares rose more than 7 percent, and the Greek banking index .FTATBNK surged 15 percent. Spanish and Italian stocks also outperformed as the pan-European FTSEurofirst 300 index .FTEU3 gained more than 1 percent.
The new Greek government, led by the left-wing Syriza party that won elections just over a week ago, on Monday ditched calls for a write-off of foreign debt and proposed ending a standoff with its official creditors by swapping the debt for new growth-linked bonds.
Finance Minister Yanis Varoufakis said after meeting investors in London on Monday that the government would spare privately held bonds from losses.
"Varoufakis is striking a more conciliatory tone with international creditors, offering to swap the debt, which is positive," said John Plassard, senior equity sales trader at Mirabaud Securities in Geneva.
Earlier, Asian shares sagged on growth concerns. MSCI's broadest index of Asia-Pacific shares, excluding Japan .MIAPJ0000PUS, dipped 0.2 percent after weak U.S. data added to concerns about the state of the global economy. Japan's Nikkei .N225 closed down 1.3 percent.
In a brighter Europe though Greek bond yields fell sharply, with 10-year yields GR10YT=TWEB down nearly 120 basis points at 10.24 percent and on track for their biggest daily fall since Greek debt was restructured in 2012.
Yields on other lower-rated euro zone government bonds also fell but so did those on German bonds, the bloc's benchmark. German 10-year yields DE10YT=TWEB dipped below those of Japan for the first time ever. [GVD/EUR]
"The latest proposals for a debt restructuring in Greece seem to have backed away from a hard haircut," RBC's head of European rates Peter Schaffrik said.
"The more concessionary tone ... should support spread products and generally speaking risky assets in the euro area."
The Aussie dollar AUD= was the big mover in currency markets, tumbling to a near six-year low against the U.S. dollar after the Reserve Bank of Australia cut interest rates. The Aussie was last down 1.8 percent at $0.7664.
"It's a big move and I think any bounce should be sold into," said Graham Davidson, a spot trader with National Australia Bank in London.
"Generally when the RBA move, they tend to cut a handful of times. The feeling is of aneconomy where there is no source of growth, almost of despair."
Oil prices rose further, adding to gains of more than 11 percent in the previous two sessions, after BP (BP.L) announced a 13 percent cut in capital expenditure for 2015.
"We've seen a lot of oil companies announce significant cuts in capacity expenditure and reductions in rig counts. What you're getting at the moment is a paring back of expectations as a result of the measures being taken," said Michael Hewson, chief market analyst at CMC Markets.
Oil prices had jumped in the past two days after data showed the number of U.S. oil drilling rigs had fallen the most in a week in nearly 30 years.
Brent crude futures LCOc1 were last up 3 percent at $56.39 a barrel.
