World stocks rise, euro steady on European hopes

By Herbert Lash

NEW YORK (Reuters) - Global equities rose and bond prices fell on Monday on hopes that Europe was tackling Greece's debt woes.

Wall Street stocks recovered from early declines but European shares pared gains of more than 2 percent as concerns about Europe's ability to contain the crisis persisted. Markets have whipsawed for months over fears of European debt contagion and hopes that officials will finally contain the long-simmering crisis.

Still, European shares closed higher and broad indexes on Wall Street climbed more than 1 percent after a weekend meeting of European policymakers buoyed hopes for a larger bailout fund and the injection of money into weaker banks.

But euro zone officials played down reports of nascent plans to halve Greece's debts and recapitalize European banks, saying no such plan is yet on the table.

"Europe is a day-to-day story, it seems like we flip-flop back and forth over whether Greece is going to get the bailout they want and how concerned the markets are about Greece," said James Newman, head of Treasury and Agency trading at Keefe, Bruyette and Woods in New York.

"I don't see that ending any time soon," he said.

The euro extended losses and damped risk appetite after data showed U.S. new home sales fell 2.3 percent in August to a six-month low, a fresh sign of the struggling housing market -- a pillar of the U.S. economy.

The euro rebounded at midday to trade near break-even at $1.3507.

MSCI's all-country world equity index was little changed, down 0.01 percent.

The FTSEurofirst 300 added 1.7 percent, following a 0.8 percent gain on Friday.

A broad measure of the U.S. stock market, the S&P 500 index, climbed into positive territory after an early loss, as did the tech-rich Nasdaq, while the Dow traded higher.

After three hours of trading, the Dow Jones industrial average was up 143.42 points, or 1.33 percent, at 10,914.90. The Standard & Poor's 500 Index was up 9.96 points, or 0.88 percent, at 1,146.39. The Nasdaq Composite Index was up 1.00 points, or 0.04 percent, at 2,484.23.

Government debt prices on both sides of the Atlantic fell on reports the European Union was looking at boosting the region's 440 billion euro rescue fund and other ways to avert a Greek debt default.

The benchmark 10-year U.S. Treasury note was down 18/32 in price to yield 1.89 percent. The December Bund future shed 72 ticks to 137.40.

Brent and U.S. crude oil futures turned positive in volatile trading as the U.S. dollar weakened against a basket of currencies, improving investors' risk

appetite.

Brent crude oil slipped below $104 a barrel as investors worried European governments and banks would be unable to resolve the euro zone debt crisis and avert wider financial contagion.

Brent futures for November rose 62 cents to $104.59.

U.S. light sweet crude oil rose 52 cent to $80.37 a barrel.

"These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008," said Edward Meir, senior commodities analyst at brokers MF Global. "The key difference this time around is that it is countries and not companies that are in danger of going bust."

Gold futures fell, on course for their largest monthly slide in three years as investors scrambled for cash in the face of mounting fear over the impact of a potential Greek default.

Spot gold prices fell $55.30 to $1,599.90.

(Reporting by Karen Brettell, Gertrude Chavez-Dreyfuss and

Rodrigo Campos in New York; Simon Jessop, Anirban Nag, Emelia

Sithole-Matarise, Joanne Frearson and Amanda Cooper in London

and ; Writing by Herbert Lash, Editing by Dan Grebler)