* Euro gains nearly 5 pct against dollar since Jan. 7
* GE results, Spain's plan to save banks boost stocks
* World stocks record largest weekly loss in 8 weeks
(Updates with U.S. markets' close)
By Walter Brandimarte
NEW YORK, Jan 21 (Reuters) - The euro hit a two-month high
above $1.36 on Friday on hopes the euro zone will find a
durable solution for its debt crisis, while world stocks gained
as robust GE earnings foreshadowed a stronger U.S. economy.
European banking shares jumped on Spain's plan to partially
take over its weakest saving banks. Coupled with expectations
of a strengthened euro zone rescue fund, the plan to save
Spanish banks helped ease tensions over the European crisis.
For details, see [].
"Markets are clearly buying into the view that the European
debt crisis is being resolved with modest pain," said Steven
Englander, head of G10 FX strategy at Citigroup in New York.
The euro strengthened for the fourth consecutive session,
also boosted by a report showing German business confidence
rose to its highest level in 20 years in January.
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The European single currency <EUR=> was trading at $1.3613,
up 1.02 percent from Thursday's close. It has rallied nearly 5
percent since a low of $1.2916 reached on Jan. 7.
The dollar was 0.85 percent weaker against a basket of
major currencies, according to the U.S. dollar index <.DXY>.
Against the Japanese yen, the greenback <JPY=> was down 0.51
percent at 82.56.
GE SUPPORTS DOW
World stocks rallied after two sessions of losses as
General Electric Co <GE.N>, the largest U.S. conglomerate,
reported stronger-than-expected quarterly earnings and its
first rise in overall revenue since late 2008.
GE shares jumped 5.6 percent on the New York Stock
Exchange, accounting for the largest portion of gains of the
Dow industrials.
But Google Inc <GOOG.O> erased early gains to finish 2.38
percent lower, one day after reporting stronger-than-expected
quarterly results.
The action in Google shares was "not so much Google
earnings, but a factor of the market itself," said Robert
Francello, head of equity trading for Apex Capital in San
Francisco.
"We had such a massive run in the end of December and early
this month, we might be seeing selling into good earnings," he
said, adding that fast-money investors seem to be preparing
themselves for some consolidation in the short term.
The Dow Jones industrial average <> ended up 49.04
points, or 0.41 percent, at 11,871.84, while the Standard &
Poor's 500 Index <.SPX> rose 3.09 points, or 0.24 percent, to
1,283.35. The Nasdaq Composite Index <> declined 14.75
points, or 0.55 percent, to 2,689.54.
In Europe, the FTSEurofirst 300 <> index of top
shares closed 0.8 percent higher, after falling 2.4 percent in
the previous two sessions.
Major Spanish banks advanced, with Banco Santander <SAN.MC>
up 3.78 percent and BBVA <BBVA.MC> rising 3.36 percent.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> climbed 0.46 percent, but the benchmark
indicator still posted its largest weekly loss in eight weeks.
GOLD POSTS 3RD WEEKLY LOSS
The increase in appetite for stocks reduced the safe-haven
allure of gold, which posted its third weekly loss. Spot gold
prices <XAU=> fell 0.27 percent, to $1,341.80 an ounce. U.S.
gold futures for February delivery <GCG1> settled down $5.50 at
$1,341 an ounce.
Prices of U.S. Treasuries rose, but analysts said the broad
improvement in the U.S. economy and expectations of interest
rate rises by major central banks are likely to keep bond
prices down.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
11/32 in price, with the yield at 3.4101 percent.
U.S. crude oil <CLc1> fell 0.54 percent, to $89.11 a barrel
on news of rising domestic stockpiles. In London, however,
Brent crude oil futures <LCOc1> jumped 1.06 percent to $97.60 a
barrel as the dollar fell against the euro and confidence on
the European recovery increased.
(Additional reporting by Angela Moon, Gertrude
Chavez-Dreyfuss, Richard Leong, and Kirsten Donovan; Editing by
Kenneth Barry)
