* Equities up sharply on hopes from stimulus plans
* Wall Street set for positive start
* Dollar slides against euro but gains on yen
* Bond yields jump
By Jeremy Gaunt, European Investment Correspondent
LONDON, Dec 8 (Reuters) - Equities surged around the world
on Monday with investors taking heart from a likely rescue plan
for U.S. automakers, a proposed U.S. jobs plan and more
government stimulus measures to reverse economic decline.
Wall Street also looked set for a positive start.
The dollar fell against other major currencies apart from
the yen while demand for government bonds dropped.
European shares jumped, led by banks and oils, tracking
gains in the United States and Asia.
The FTSEurofirst 300 <> index of top European shares
traded 5.3 percent higher. Earlier, Japan's Nikkei <>
climbed 5.2 percent to its highest close in a week.
U.S. president-elect Barack Obama said on Saturday that his
plan to create at least 2.5 million new jobs included the
largest infrastructure investment since the 1950s and a huge
effort to reduce U.S. government energy use.
Lawmakers in the U.S. Congress are also working on draft
legislation to help out the embattled auto industry.
"The central banks have done their job and now the focus is
on governments -- in addition to Obama's plan we have stimulus
packages from India, Australia and China," said Thierry Lacraz,
strategist at Pictet in Geneva. "While this will not avoid a
recession, investors at least have the feeling that the people
in charge are doing the right thing."
Global stocks as measured by MSCI <.MIWD00000PUS> were up
around three percent. For the year to date, however, they remain
down more than 46 percent.
HIGHER YIELDS
The dollar fell broadly, hitting its lowest against the euro
and a basket of major currencies in more than a week as the
steep rally in European shares indicated renewed risk appetite
and boosted higher-yielding currencies.
The euro <EUR=> rose 1 percent to $1.2867 while the dollar
index <.DXY> fell 1 percent.
However, the yen tumbled, hitting its lowest level against
higher-yielding currencies including the Australian dollar, the
euro and sterling in roughly a week due to the slight pullback
in risk aversion which boosted European shares.
The dollar <JPY=> was up 0.4 percent to 93.24 yen, off its
highs.
"Higher stocks are driving everything at the moment and
currencies are trading in line with this, with higher yielders
gaining and lower yielders on the defensive," said Adam Cole,
global head of FX Strategy at RBC Capital Markets in London.
Euro zone government bond yields rose sharply.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR>
was up 14 basis points at 2.239 percent. The Schatz is also
sensitive to gains by equities as the short-end of the yield
curve is more liquid and a gateway for equity investors to
return to the stock market.
The 10-year Bund yield <EU10YT=RR> was up 11 basis points at
3.14 percent, as the yield curve flattened.
(Additional reporting by Sitaraman Shankar; editing by David
Stamp/Victoria Main)
