Eurozone government bond yields fell sharply and the euro inched higher yesterday following well-received auctions of Spanish and French debt, although equity and commodity prices ran into profit-taking following the strong gains of the previous session.

The improvement in confidence in the eurozone followed Wednesday’s concerted action by central banks to avoid a liquidity crisis by cutting the cost of dollar swap lines, and came as Mario Draghi hinted that the European Central Bank could take more aggressive action to tackle the region’s debt crisis.

Mr Draghi, the ECB president, called for a “fiscal compact” between eurozone governments to restore investor confidence in the region. European Union leaders are due to hold a summit at the end of next week.