* MSCI world equity index up 0.3 pct at 295.81
* Euro, European stocks keep gains after Greece downgrade
* Dollar holds up; government bonds lower
By Natsuko Waki
LONDON, Dec 22 (Reuters) - World stocks rose for a second
day running on Tuesday and the dollar clung onto gains despite
data showing the U.S. economy grew in the third quarter at a
slower pace than initially thought.
The euro and European stocks held firm after Moody's
delivered a widely anticipated downgrade to Greece's sovereign
rating. The cut was a smaller-than-expected one notch to A2.
The other two major rating agencies had already downgraded
the euro zone member to lower levels earlier this month.
Firmer stocks sapped demand for safe-haven U.S. Treasuries,
whose 10-year yield leapt to a four-month high above 3.7 percent
<US10YT=RR>. This in turn supported the dollar, which hit a
two-month high. <JPY=>
The final estimate for U.S. third-quarter gross domestic
product showed the economy growing at 2.2 percent annual rate
instead of the 2.8 percent pace reported last month.
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But stronger U.S. job and retail figures this month have
persuaded some economists to upgrade growth forecasts.
"Equities look set to continue nudging their way higher as
we move towards the Christmas break although volumes are likely
to keep falling as the week progresses," said Cameron Peacock,
market analyst at IG Markets.
MSCI world equity index <.MIWD00000PUS> rose 0.3 percent, on
track to scoring one of the biggest annual gains in the past 20
years.
The FTSEurofirst 300 index <> rose half a percentage
point, with banks and drugmakers leading the gains.
Emerging stocks <.MSCIEF> rose over half a percent.
U.S. stock futures gained around 0.3 percent <SPc1>
following Monday's climb on Wall Street after landmark U.S.
healthcare legislation passed a crucial test for approval and
Barclays Capital upgraded giant chipmaker Intel <INTC.O> to
"overweight".
U.S. crude oil <CLc1> erased earlier gains to fall half a
percent to $73.24 a barrel <CLc1> after OPEC agreed to roll over
its production targets.
Bund futures <FGBLc1> fell 47 ticks. The premium investors
demand to hold 10-year Greek government bonds rather than euro
zone benchmark German Bunds tightened sharply to 249 basis
points after the modest Moody's downgrade.
At one stage on Monday, Greek 10-year debt <GR10YT=RR>
yielded as much as 285 basis points more than Bunds <EU10YT=RR>,
the widest spread since the first quarter of 2009.
The dollar rose as high as 91.47 yen.
"We saw dollar gain even as stocks post gains. What still
remains unclear is whether we have experienced an inflection
point in the dollar or merely year-end position squaring," RBC
said in a note to clients.
"It remains quite intriguing that though we are seeing a
number of 'risk sensitive' currencies get clobbered, there does
not seem to be much of an elevated aversion to risk across
markets in general."
The dollar <.DXY> was steady against a basket of major
currencies while the euro gained 0.1 percent to $1.4306 <EUR=>.
(Additional reporting by David Brett, editing by Mike Peacock)
