* Euro trading near 2-month low after bailout
* European shares fall back after positive start
* Bond markets mixed
* Wall Street set for small gains
By Jeremy Gaunt, European Investment Correspondent
LONDON, Nov 29 (Reuters) - Ireland's debt bailout failed to
give European markets much of a boost on Monday, although
globally there was more of a willingness to buy riskier assets.
Wall Street looked set to open modestly higher, and emerging
market stocks as measured by MSCI <.MSCIEF> gained around a
quarter of a percent.
But the euro was generally weaker and dropped below $1.32
<EUR=>. European stocks fell back into negative territory after
some early gains.
European Union finance ministers endorsed an 85 billion-euro
($115 billion) loan package on Sunday to help Dublin cover bad
bank debts and bridge a huge budget deficit.
They also approved the outlines of a long-term European
Stability Mechanism (ESM), based on a Franco-German proposal,
that will create a permanent bailout facility and make the
private sector gradually share the burden of future defaults.
The package was designed both to help Ireland and to stop a
rolling crisis from moving on to Portugal and, perhaps, Spain.
Irish government bond yields fell in response but elsewhere
on the periphery, the news was received more cautiously.
Portuguese and Spanish 10-year bonds moved little and
analysts said that the EU moves were unlikely to lessen
expectations that at least Portugal would also need financial
assistance.
"With Portugal, we still think they eventually will have to
tap the fund because yields at the moment (above 7 percent) are
too high," said Peter Schaffrik, head of European rates strategy
at RBC Capital Markets.
European assets have been hit by concerns over the spread of
the debt crisis, although the reaction has not been as great as
it was in May and June during the Greek crisis.
Underlying market positioning also does not suggest any
immediate expectations of disaster for the euro zone.
That said, the euro was at $1.3188, around two-month lows.
"The difficulty for the market is to allow itself the luxury
of letting these developments get traction in a currency market
where buying the euro is still akin to catching the falling
knife," Daragh Maher, deputy head of global foreign exchange
research at CIB wrote.
Recent signs of recovery in the U.S. economy may also be
boosting the dollar. A lower euro, meanwhile, will help the euro
zone maintain what has been some steady signs of economic
improvement, notwithstanding the debt issue.
WEAK STOCKS
European shares were also weaker, with the FTSEurofirst 300
<> index of top European shares was down 0.4 percent.
"I think it's on the euro-zone in general as there is still
no 'final solution' for the sovereign debt crisis -- everyone is
afraid of another country asking for aid ... and another ... and
another," on trader said.
The underling picture for European equities has not been so
bad, however.
Thomson Reuters Proprietary Research reported on Monday that
nearly two-thirds of the companies in the Euro Stoxx 600 index
<> had beaten earnings expectations in the third quarter.
Earlier, Japan's Nikke <> had a five-month closing
high.
(Additional reporting by Kirsten Donovan, Anirban Nag and Atul
Prakash; editing by Patrick Graham)
