* U.S. stocks extend rally on Greece bailout speculation
* Euro rises against dollar, best day in 2-1/2 months
* Dow Jones industrials close above 10,000
* Commodity prices gain on U.S. dollar woes
(Updates with closing U.S. market prices, comment)
By Daniel Bases
NEW YORK, Feb 9 (Reuters) - U.S. stocks and the euro on
surged Tuesday on reports that euro zone countries decided in
principle to come to the aid of debt-laden Greece, whose fiscal
problems have soured risk appetite.
The euro posted its biggest gain against the dollar in more
than two months and the Dow industrials had their biggest
one-day percentage gain in three months.
A spokesman for the German government, however, later
denied as unfounded reports that various options were being
considered to help Greece regain its fiscal footing and limit
financial contagion, trimming the euro's gains against the
dollar. []
The denial, however, failed to seriously dent the positive
sentiment.
"In an environment where the market was increasingly
leaning towards the 'the inevitable, i.e. the bailout as a
matter of timing and not probability, the news was almost
accepted as a fait compli," said Matthew Strauss, senior
currency strategist at RBC Capital Markets in Toronto.
The greenback's drop helped lift spot gold prices 1.31
percent and crude oil gained 2.59 percent.
European Union leaders will hold a special summit on the
economy on Thursday in Brussels amid the increasing worries
that Greece and other so-called peripheral euro zone economies,
including Spain and Portugal, cannot handle their debts and
deficits.
The EU's economic and monetary affairs commissioner,
Joaquin Almunia, said the situation in Greece was difficult and
a common concern for the EU. []
The Dow Jones industrial average <> rose 150.25 points,
or 1.52 percent, to 10,058.64. The Standard & Poor's 500 Index
<.SPX> added 13.78 points, or 1.30 percent, to 1,070.52. The
Nasdaq Composite Index <> gained 24.82 points, or 1.17
percent, to 2,150.87.
Oil company stocks rose along with the price of crude, with
Chevron <CVX.N> gaining 1.9 percent to $71.45
"Everyone expects there to be some assistance out of the EU
to help Greece, and that's what's giving the market a boost,"
said Tim Smalls, head of U.S. stock trading at brokerage firm
Execution LLC in Greenwich, Connecticut.
Stocks in Europe, however, missed out on much of the Greek
developments and closed flat after having gained early on
thinner speculation about a bailout for the fiscally strapped
euro zone member.
In Europe, the FTSEurofirst 300 <> rose 0.17 percent
to 979.33, with banks among the top gainers. The pan-European
index is down 6.37 percent year-to-date.
EURO INFLUENCE
Spreads between German 10-year bonds <DE10YT=RR> and Greek
and Portuguese equivalents <GR10YT=RR> <PT10YT=RR> narrowed,
although they remained wide at 320.5 and 144.9 basis points,
respectively.
The euro climbed 1 percent at $1.3787 <EUR=> and against
the yen it rose 1.35 percent to 123.54 yen <EURJPY=>.
"If they do come and help Greece, (that) would do it for
now. It would help bring the euro back from the multi-month
lows," said Greg Salvaggio, senior vice president for capital
markets at Tempus Consulting in Washington.
The dollar was down 0.65 percent against a basket six major
currencies <.DXY>.
The euro is down 4.0 percent versus the dollar year-to-date
and over 7.5 percent against the yen, in part because of
concerns over debt.
Spot gold <XAU=> hit a session high of $1,083.05 an ounce
and was bid at $1,076.70, up 1.31 percent. Crude oil prices set
tled up 2.59 percent at $73.75 a barrel <2CLc1>.
Benchmark 10-year U.S. Treasuries fell 19/32 of a point in
price, pushing the yield up to 3.64 percent <US10YT=RR>. Some
of the weakness was blamed on average demand for the
government's $40 billion three-year note auction.
World stocks as measured by MSCI <.MIWD00000PUS> rose 0.89
percent, lifted mainly by gains of 1.63 percent in their
emerging market component. Chinese and Hong Kong shares were
generally higher, cheered by higher commodity prices.
Japan's Nikkei Nikkei <> edged down 0.2 percent to a
two-month closing low.
Toyota Motor Corp <7203.T>, whose shares have lost about a
fifth of their value since late January, rose on short-covering
with investors welcoming signs it was taking steps to deal with
its safety problems.
(Additional reporting by Gertrude Chavez-Dreyfuss, Emily
Flitter, Tom Ryan and Caroline Valetkevitch in New York; Jeremy
Gaunt, Atul Prakash and Neal Armstrong in London; Marcin
Grajewski in Strasbourg; Editing by Leslie Adler)
