* Banks recover to boost European stock markets
* Dollar index up 0.17 pct, aided by U.S. recovery hopes
* Greek yield spread widens on continued fiscal worries
By Nigel Stephenson
LONDON, Dec 21 (Reuters) - European shares rose on Monday,
led by banks, while the euro dipped against the dollar on
expectations the U.S. economy may recover more quickly than the
euro zone.
The rise in shares -- an index of leading European stocks
<> was up 0.7 percent -- pushed safe-haven euro zone
government bonds lower. Gold held steady, capped by the dollar
gains, and crude oil prices steadied.
Banks were the top gainers among European shares, recovering
from concerns over tougher capital regulation. The banks <.SX7P>
rebounded after losses last week following proposed new rules
from the Basel Committee on banking supervision.
Heavyweight oil producers rose as crude prices stayed firm
after a 1 percent rise on Friday.
London Stock Exchange <LSE.L> rose after it agreed to take a
60 percent stake in rival trading platform Turquoise and merge
it with its own "dark pool" platform Baikal.
Japan's Nikkei average <> rose 0.4 percent to an
eight-week closing high on gains in high-tech exporters such as
chip-tester Advantest Corp <6857.T> and boosted by a weaker yen.
The euro dipped against the dollar on lingering concerns
over the fiscal health of Greece. The U.S. currency was also
supported by the brighter outlook for the U.S. economy after
stronger figures in the job market and retail sales last week.
The euro <EUR=> was down 0.3 percent on the day at $1.4302,
after falling to its lowest since September on Friday. The
dollar index <.DXY>, which measures the greenback's performance
against a basket of six currencies, was up 0.17 percent, close
to its highest for almost three months.
"It looks like we may be seeing better growth prospects in
the U.S. than the euro zone. Better employment and retail sales
data in the U.S. has raised the possibility of a cyclical
recovery in 2010," ING currency strategist Chris Turner said.
Euro zone government bonds fell as shares rose but traders
said volumes were very thin ahead of the holiday season.
Worries about Greece hit its government bonds in recent
weeks. Standard and Poor's and Fitch have already cut their
credit ratings on Greece.
March Bund futures <FGBLc1> were down 15 ticks at 123.38.
The premium investors demand to hold Greek debt rather than
German rose around four basis points to 268.
"The periphery is probably going to remain the focus but
trading has been thin anyway the last few sessions and that is
unlikely to change," a trader said.
Oil steadied after a 1 percent rise on Friday as Iranian
troops partly withdrew from a disputed oil area claimed by
Tehran and Baghdad, easing tensions between two major crude
exporters.
Crude for January delivery <CLc1> fell 17 cents to $73.19 a
barrel. London Brent crude <LCOc1> was 36 cents higher at $74.10
a barrel.
Gold prices were steady with gains capped by bets the U.S.
currency could extend its recent rally. Spot gold <XAU=> was at
$1,113 an ounce, compared with $1,112.25 in New York late on
Friday.
(Additional reporting by Charlotte Cooper, Dominic Lau, Jessica
Mortimer and Kirsten Donovan; Editing by Toby Chopra)
