* Global stocks gain on Portuguese bond sale, sentiment
* Euro rises vs dollar after good demand for Portugal debt
* Brent oil hits 27-month high above $98 on demand outlook
* Strong Portuguese auction dampens demand for Treasuries
(Updates with close of European markets)
By Herbert Lash
NEW YORK, Jan 12 (Reuters) - Global stocks and the euro
rallied on Wednesday after healthy demand for Portugal's debt
sale eased concern over the latest spasm of Europe's lingering
debt crisis and boosted sentiment among investors.
European stocks hit a 28-month closing high, lifted by
speculation the European Union will bolster the region's rescue
fund, and government bond prices dropped after the Portuguese
bond auction reduced the safe-haven appeal of debt and gold.
The average yield on Portugal's 10-year bond fell compared
to a previous sale in November, confounding expectations that
yields would top 7 percent for the first time in the history of
the euro zone.
The euro extended gains versus the U.S. dollar, with
traders citing options-related demand pulling it toward a
session high of $1.3113. For details see []
That gain put the euro above its 200-day moving average,
which Reuters data put at $1.3070, a level that would be a
first step toward improved euro sentiment, traders said.
World stocks as measured by MSCI's all-country world index
<.MIWD00000PUS> advanced 1.4 percent, while it's emerging
markets index <.MSCIEF> gained 1.7 percent.
In Europe, the FTSEurofirst 300 <> index of top
European shares finished 1.5 percent higher at 1,163.94 points,
the highest close since September 2008, with Spanish banks
leading a relief rally.
"Encouraging news that the EU Commission could use the
region's rescue fund to back sovereign debt issues is helping
bring down risk premiums and this is directly benefiting the
banks," said Oscar Moreno, fund manager at Renta4 in Madrid.
U.S. stocks also gained, helped by signs of strength in the
U.S. banking sector, but Europe played a key role.
The European debt crisis and future strength in U.S. banks
"are probably the two big stories" for equities, said Eric
Kuby, chief investment officer at North Star Investment
Management Corp in Chicago.
Wells Fargo raised the U.S. bank sector to an "overweight"
rating and JPMorgan Chase & Co <JPM.N> Chief Executive Jamie
Dimon said his bank could pay an annual dividend of 75 cents to
$1 once the Federal Reserve completes and approves stress tests
of the largest U.S. banks. [].
On Wall Street, the Dow Jones industrial average <> was
up 107.85 points, or 0.92 percent, at 11,779.73. The Standard &
Poor's 500 Index <.SPX> was up 12.14 points, or 0.95 percent,
at 1,286.62. The Nasdaq Composite Index <> was up 18.00
points, or 0.66 percent, at 2,734.83.
After Lisbon's successful debt sale, attention now turns to
Spain and Italy, which will sell debt on Thursday in closely
watched auctions. Analysts expect the sales to pass without a
major hitch, albeit at higher costs.
"A couple of positive bond auctions might limit euro
losses, but I don't think they are going to alleviate any of
the long-term concerns," said Omer Esiner, chief market analyst
at Commonwealth Foreign Exchange in Washington.
"There's still a huge amount of debt that needs to be
rolled over and that's going to continue to keep investors
wary," he added.
The euro <EUR=> was last traded up 1.0 percent at $1.3099.
Oil prices rose after the Portuguese bond sale soothed
concern over the euro zone's finances.
Spot gold prices <XAU=> rose to $1,381.67.
Brent crude oil rose above $98 a barrel for the first time
in 27 months, before paring some gains, as production shutdowns
and growing global demand raised expectations of tighter
supplies. []
A gas leak forced two Norwegian oilfields to shut down
briefly and a leak shut the Trans Alaska Pipeline, which ships
about 12 percent of U.S. crude output, on Saturday although it
has been allowed to resume "limited operations."
Brent <LCOc1>, the benchmark for oil trade in Europe, the
Middle East and Africa, rose as much as 85 cents to $98.46, the
highest in 27 months, and was up $1.07 cents at $98.68.
U.S. light sweet crude oil <CLc1> rose 86 cents to $91.97 a
barrel.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 17/32 in price to yield 3.40 percent.
German bonds fell to their lowest since late December. The
March Bund future <FGBLc1> dropped 122 ticks in price on the
day, before recovering slightly to settle 110 ticks lower at
124.69.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.86 percent at 80.151.
Asian shares were flat to slightly higher on the back of
gains on Wall Street and solid U.S. earnings reports. Tokyo's
benchmark Nikkei index <> edged up 0.02 percent. The MSCI
index of Asia Pacific stocks ex-Japan <.MIAPJ0000PUS> rose 1.1
percent.
(Reporting by Chuck Mikolajczak, Karen Brettell, Wanfeng Zhou
and Stephen S. Johnson in New York; Atul Prakash, Alex Lawler
and William James in London; Writing by Herbert Lash, Editing
by Kenneth Barry)
