World stocks and the euro rose to their highest levels in nearly two months on Thursday after European leaders struck a deal to resolve a two-year-old sovereign debt crisis, which threatens the survival of the single currency.

Brent crude and copper prices also rallied. Prices in safe-haven U.S. Treasuries and German Bunds fell, though those from other highly indebted euro zone countries gained.

The deal, announced in the early hours of Thursday, will see private bondholders of Greek debt accept a 50 percent loss on their investment, while banks will be recapitalized and the size of the currency bloc's rescue fund will be leveraged to 1 trillion euros ($1.4 trillion).

Even though details are not yet in place, the extension of the (rescue fund) will build a firewall between Greece and the rest, said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

With the agreement on a 50 percent haircut for Greece, quite a bit of uncertainty has been taken off the table as well ... The restoration of confidence is an important step in the healing process. However, we will see whether the recovery in risky assets has legs.

Europe's FTSEurofirst 300 <.FTEU3> gained 2.5 percent, with European banks <.SX7P> surging 4.4 percent, while yields on 10-year Greek government bonds fell 15.3 basis points to 24.87 percent.

World stocks measured by the MSCI All-Country World Index advanced 1.7 percent to hit their highest level since early September.

The global benchmark is up 10.6 percent so far this month, on track for its biggest monthly gain in more than two years, driven by hopes that euro zone policymakers would announce a decisive plan to end the two-year-old turmoil at the summit.

It would be clearly premature to declare the euro crisis as fully resolved. Much more needs to be done, especially regarding fiscal consolidation, Credit Suisse Private Banking said. Achieving such a consolidation will be difficult in a phase of slow growth, or in some cases recession.

Nevertheless, it is our impression that EU leaders have made significant progress on all fronts. This suggests that the rebound in risk assets that has been underway in recent days may well continue for some time.

The euro was up 0.9 percent at $1.4021 and 0.4 percent at 106.37 yen.

The announcement also boosted high-yielding currencies, with the Australian dollar up 1.4 percent at $1.0541.

Copper was up 2.4 percent and on track for its best weekly percentage gain since February 2009, while Brent crude rose 1.7 percent to above $110 a barrel.

(Additional reporting by Kirsten Donovan Atul Prakash and Joanne Frearson; editing by Anna Willard)