* Global equities surge on European debt accord
* Euro hits 7-week high after sovereign debt deal
* Crude pushes higher as economic demand worries ease
By Herbert Lash
NEW YORK, Oct 27 (Reuters) - A long-awaited plan to staunch the European debt crisis sparked euphoria across financial markets on Thursday, driving up the value of the euro and the price of world stocks, crude oil and other commodities.
Major U.S. stock indices, which had been close to bear territory in the summer because of the debt crisis, climbed back into the black for 2011, with the benchmark S&P 500 on track to post its biggest monthly gain since 1974.
Metal prices jumped 5 percent or more, U.S. oil rose more than 4 percent and the euro gained 2.4 percent after European leaders agreed to a sweeping plan to resolve a crisis that has threatened to push the U.S. and other economies back into recession.
The deal envisions a recapitalization of European banks, a far more powerful rescue fund for the euro zone and 50 percent losses for Greek debt holders.
For the moment, investors shrugged off the fact that key aspects of the deal, including the mechanics of boosting the firepower of the European Financial Stability Facility and providing Greek debt relief, could take weeks to finalize.
"This is not a magic elixir. It's a very good start and certainly more than people had expected," Bill O'Neill, partner at commodity investment firm LOGIC Advisors, said of the deal.
The euro surged past stop-loss points as investors reacted positively to the deal, gaining 2.4 percent to $1.4209.Investors were forced to unwind bets against the single currency as they awaited more details.
World stocks extended gains to hit their highest level since early August, with the MSCI all-country equity index rising 4.3 percent.
U.S. stocks rallied more than 3 percent, and in a sign of investor relief, Wall Street's "fear gauge," the CBOE Volatility Index , fell 15 percent.
The Dow Jones industrial average was up 358.81 points, or 3.02 percent, at 12,227.85. The Standard & Poor's 500 Index was up 44.31 points, or 3.57 percent, at 1,286.31. The Nasdaq Composite Index was up 93.95 points, or 3.54 percent, at 2,744.62.
Data showing the U.S. economy grew at its fastest pace in a year in the third quarter as consumers and businesses stepped up spending also helped spur risk appetite.
U.S. gross domestic product expanded at a 2.5 percent annual rate in the third quarter, the Commerce Department said.
Emerging market shares, as measured by MSCI , surged 4.1 percent. European shares soared to their highest close in 12 weeks, with French banks, heavily exposed to euro zone peripheral debt, among the biggest gainers.
Credit Agricole gained 22 percent and BNP Paribas shot up 17 percent.
The FTSEurofirst 300 index of top European shares ended the session up 3.7 percent at 1,020.10, the highest close since Aug. 3.
"Decisions have been made, whatever they are, and that's a good thing. I fear further down the road we'll find they're not as good as we thought," said Gavin Launder, fund manager at Legal & General, which has 356 billion pounds ($570 billion) under management.
Crude oil jumped to $112 a barrel as the European debt deal and supportive U.S. data eased concerns that economic weakness could curb energy demand.Oil later pared its gains.
ICE Brent December crude closed up $3.17 to settle at $112.08 a barrel, while U.S. light sweet crude oil rose $3.76 to settle at $93.96 a barrel.
Prices of safe-haven U.S. Treasuries and German Bunds tumbled, while those of highly indebted euro zone countries gained.
The benchmark 10-year U.S. Treasury note was down 52/32 in price to yield 2.40 percent.
Spot gold prices rose $21.35 to $1,745.10 an ounce.