* World stocks rise, boosted by possible U.S. tax deal
* Euro sheds gains on skepticism about Europe's debts
* Commodities fall from multiyear highs
(Updates with European markets' close)
By Manuela Badawy
NEW YORK, Dec 7 (Reuters) - Global stocks rose on Tuesday,
boosted by a possible deal to extend expiring U.S. tax cuts,
while the euro relinquished gains on dwindling confidence in
the euro zone's ability to tackle debt problems.
Copper, oil and gold touched multiyear highs before
retreating as the dollar rose.
U.S. government bonds dropped as the tax deal is seen as a
stimulus for the economy, benefiting stocks, commodities and
other risky assets.
The euro had risen on optimism that Ireland's lawmakers
will pass the toughest budget ever. But tension persisted,
pressuring the single currency after euro zone ministers said
they would take no new measures to prevent debt problems from
spreading.
Greece and Ireland have received official bailouts, but the
fear is Portugal and perhaps Spain and Italy could be hit by
debt contagion.
"If the Irish pass an austerity budget, it alleviates some
political uncertainty, but EU finance ministers provided no
signals for additional steps to help stabilize European credit
markets," said Omer Esiner of Commonwealth Foreign Exchange in
Washington.
"It looks like we're back to the status quo, which means
sell the euro on contagion fears." He said a pullback in stocks
and commodities also contributed to "a heavier tone for risk
assets in general."
The Dow Jones industrial average <> was up 47.41
points, or 0.42 percent, at 11,409.60. The Standard & Poor's
500 Index <.SPX> was up 5.99 points, or 0.49 percent, at
1,229.11, after touching a new 2010 intraday high at 1,234.83.
The Nasdaq Composite Index <> was up 15.70 points, or
0.61 percent, at 2,610.62.
Global stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> rose 0.49 percent.
Europe's FTSEurofirst 300 <> index of top shares hit
a four-week high to close up 0.9 percent on economic recovery
hopes after the possible compromise on Bush-era U.S. tax cuts,
while mining company shares rose on demand expectations.
U.S. President Barack Obama unveiled a deal late on Monday
to renew tax cuts for the middle class as well as for wealthy
Americans, a concession to Republicans. For details see
[] Some Democrats balked at major components of a
possible compromise bill, but talks will continue in coming
days.
U.S. House of Representatives Speaker Nancy Pelosi said
some of the provisions announced on Monday by Obama help only
the wealthiest 3 percent of taxpayers and would fail to create
jobs while adding billions of dollars to U.S. government
deficits.
Obama's announcement was welcomed by the markets as
investors bet that the tax breaks would prompt increased
spending and buoy the economy as well as lessen chances
investors would sell shares.
"U.S. activity is reliant on consumer spending, so any move
to help consumers start spending money, particularly in the
Christmas period, is going to be seen as positive for the
markets," said Joshua Raymond, market strategist at City Index
in London.
The euro <EUR=> surrendered some of its gains to move 0.1
percent higher at $1.3317 as euro zone policymakers failed
to agree on new policies to tackle the region's debt crisis.
The dollar was up at 83.140 yen <JPY=> after slipping to a
three-week low against the Japanese currency earlier in the
session. The renewed strength in the yen dragged Japan's Nikkei
225 <> down 0.3 percent.
The dollar was slightly up against a basket of major
currencies, with the U.S. Dollar Index <.DXY> up 0.13 percent
at 79.671 as the news to possibly extend the Bush tax cuts in
the United States was seen by investors as dollar-negative.
While the plan could accelerate U.S. growth, it is funded
through debt and expected to add significantly to the budget
deficit, thus would be another weight on the dollar.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Take a Look on euro zone debt crisis: []
Scenarios on euro zone crisis: []
Graphics package on Europe's struggle with debt:
http://r.reuters.com/hyb65p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
EYES ON EUROPE, COMMODITIES
Euro zone policymakers have yet to show financial markets
that they can decisively resolve the region's debt problem.
After a five-hour meeting, the bloc's finance ministers
said late on Monday they would be taking no new steps to tackle
the contagion, saying an existing emergency fund was
sufficiently big and that a proposal to issue euro zone bonds
had not even been broached. []
German Chancellor Angela Merkel, speaking in Berlin,
rebuffed calls for a bigger financial safety net or joint euro
bonds.
Commodities, meanwhile, shed gains after touching multiyear
or record highs as macroeconomic factors and a firmer euro
boosted prices.
Copper <CMCU3> rallied to a record high above $9,000 a
tonne before easing to $8,870 on rising demand expectations for
2011 against a backdrop of tight supply and a softer dollar.
U.S. light sweet crude oil <CLc1> fell 68 cents, or 0.72
percent, to $88.75 per barrel after rising above $90 a barrel
for the first time in 26 months.
Spot gold prices <XAU=> fell $15.25, or 1.08 percent, to
$1407.08 after touching a record high at $1,430.95 an ounce.
U.S. government bond prices stumbled as the proposed
extension of tax cuts raised concerns over inflation and the
federal government's ability to meet its long-term debt
burden.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 43/32, with the yield at 3.0899 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 5/32, with the yield at
0.5079 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 64/32, with the yield at 4.3579 percent.
(Additional reporting by Julie Haviv, Richard Leong, Leah
Schnurr in New York and Dominic Lau, Harpreet Bhal, Michael
Taylor, Jan Harvey in London; Editing by Kenneth Barry)
