European stocks surge on ECB

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European stocks surged Thursday and the euro hit a two-month high against the dollar, as investors reacted to good news from the European Central Bank.

The ECB left interest rates unchanged at 0.75%, as expected.

Investors applauded ECB president Mario Draghi as he announced details of a new bond-buying program to help stem Europe's debt crisis.

Draghi said the ECB is prepared to make "outright monetary transactions," also known as OMTs, in the secondary market for euro-area sovereign bonds.

"The ECB is going to act as a backstop for sovereigns," said Nick Stamenkovic, fixed income strategist for RIA Capital Markets in Edinburgh, Scotland. "Consequently, initial reaction is more confident that these actions will relieve some of the tensions that have overhung the market for some time."

The FTSE in London closed 2.1% higher, and the CAC 40 in Paris and the DAX in Frankfurt both closed up 2.8%.

Stamenkovic said the ECB's "forceful stability program" requires the participating nations to stay within certain parameters of fiscal prudence.

"They must attach themselves to fiscal and structural reforms," he said. "Otherwise, the ECB has the power to remove that support."

ECB's Draghi explains bond-buying program

In other markets, the Hang Seng in Hong Kong ended 0.3% higher, the Shanghai Composite rose 0.7% and the Nikkei in Tokyo was flat.

On Wall Street, the S&P, Nasdaq and Dow Jones industrial average all rose sharply in reaction to Thursday's ECB announcement and better-than-expected U.S. jobs reports.

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