European stock markets rose and the euro rallied on Wednesday after the eurozone cleared a key hurdle in solving its debt crisis with German approval for a new firewall. In a landmark ruling watched around the world, Germany\'s Constitutional Court overturned a raft of legal challenges aimed at preventing President Joachim Gauck from signing two crucial crisis-fighting tools into law. Delivering a momentous decision with far-reaching implications for the euro\'s future, the Bundesverfassungsgericht said Gauck could finally sign the European Stability Mechanism (ESM) and fiscal pact. With the 500-billion-euro ESM in place and a beefed-up European Central Bank ready to intervene massively on the markets, the EU\'s crisis fighting machinery is taking shape, sparking a positive response on the markets where borrowing costs for weaker eurozone states continued to fall. For 10-year benchmark government bonds in Spain, widely touted as the next bailout candidate, the return dipped to around 5.60 percent, compared with record unsustainable highs above 7.60 percent in July. The return on benchmark 10-year Italian government bonds slid to below 5.1 percent. With banking shares buoyed by the decision, Germany\'s DAX 30 gained 0.66 percent 7,358.18 points in afternoon deals, while in Paris the CAC 40 climbed 0.41 percent to 3,551.75 points. In London the FTSE 100 index of top shares advanced 0.11 percent to 5,798.77 points. Madrid gained 1.13 percent and Milan jumped by 1.42 percent. \"European markets opened mixed but soon rallied as the German constitutional court rejected thousands of injunctions from disgruntled opposition to Germany\'s participation in the European Stability Mechanism to help smooth the way for the euro area to attempt to contain the debt crisis,\" said Joshua Raymond, market strategist at City Index traders. \"The market has reacted well,\" said Alexandre Baradez, an analyst at Saxo Banque in Paris. \"It was good news in itself, in line with expectations, and the conditions imposed by the judges weren\'t too strict.\" In foreign exchange deals, the euro was being traded above $1.29 for the first time for four months, reaching $1.2937 at one point. It later fell back to 1.2906, which compared with $1.2848 in New York late on Tuesday. The ESM was set to replace the temporary European Financial Stability Facility (EFSF) and should have been in place by July 1. But it needed Germany\'s share of the rescue money to function and had thus been held up pending the court ruling. It is designed to come to the aid of debt-stricken countries such as Spain and Italy. The German court ruling meanwhile came as an anti-austerity party was set to score big gains in Dutch elections and as EU leaders unveil plans for the first step towards a eurozone banking union. Investors were also looking towards the Federal Reserve, whose policy board was expected to embark on fresh monetary easing measures as it meets Wednesday and Thursday to address a weak US economy and stagnant job creation. US markets opened on the positive side, with the Dow Jones Industrial Average up 0.52 percent to 13,365.97 points after five minutes of trade. The S&P 500-stock index rose 0.32 percent to 1,438.15 points, while the tech-rich Nasdaq added 0.41 percent at 3,117.34 points. Apple shares climbed ahead of its expected announcement Wednesday of the next generation of its popular iPhone. Meanwhile shares in Euro Disney, the operator of the Disneyland park outside of Paris, shot up by more thant 17 percent following a new bout of speculation that its parent company would take it back over.