By John Geddie
LONDON (Reuters) - World markets jumped on Wednesday as Ukraine's President Petro Poroshenko said a ceasefire had been reached with Russia, holding steady despite conflicting reports from the Kremlin on the agreement.
Russian shares surged more than four percent, while the rouble jumped 1.5 percent against the dollar, as hopes rose about a cooling of the conflict between Kiev and pro-Russian rebels in the country's Donbass region.
Poroshenko's press office said Ukraine's president reached agreement with his Russian counterpart Vladimir Putin on Wednesday on a "permanent ceasefire" in eastern Ukraine's Donbass region. The Kremlin later said steps towards peace had been discussed but there was no formal ceasefire because Russia is not a party to the conflict.
The FTSEurofirst 300 index of top European shares was up 0.9 percent at 1,388.11 points, while the euro was still higher on the day against almost every other major currency.
"It's favourable for the market. It reduces some uncertainty and suggests that investors will have one less tail risk to deal with," said James Butterfill, global equity strategist at Coutts, said.
"It doesn't mean that Ukraine crisis is over, but it is a step in the right direction," James Butterfill, global equity strategist at Coutts, said.
German 10-year bond yields -- the euro zone benchmark -- pulled off a day's high of 0.969 percent but were still up 3 basis points on the day.
Wall Street futures also rose 0.5 percent, pointing to a solid start for U.S. markets, while MSCI's broadest index of Asia-Pacific shares outside Japan extended gains, adding 1 percent. Asia had earlier been buoyed by a rebound in Chinese services data in August.
Japan's Nikkei stock average ended up 0.4 percent near a 7-month high, riding a weaker yen that was quashed by the bouyant US dollar. Hopes that Prime Minister Shinzo Abe's cabinet reshuffle will give fresh momentum to his growth-oriented policies also lifted sentiment.
Spot gold steadied at $1,264.00 an ounce, while Brent crude oil futures rebounded just over 1 percent to $101.46 a barrel after they fell to their lowest level in 16 months on Tuesday.
(Additional reporting by Hideyuki Sano in Tokyo)