* World stocks gain, up 7 percent over nine sessions
* Euro holds recent gains vs dollar
* EU moves on bank stress tests help ease market jitters
By Jeremy Gaunt, European Investment Correspondent
LONDON, June 18 (Reuters) - World stocks rose for a ninth
day running on Friday, extending a modest rally, and the euro
held at three-week highs as the worst fears about euro zone
sovereign debt receded.
Banks were among the biggest gainers in Europe as investors
welcomed a commitment from EU policymakers to publish 'stress
tests' revealing the true financial health of the region's
biggest lenders.
MSCI's all-country world index gained about 0.2 percent,
allowing U.S. and European shares to retrace all their losses
for this year. The index has now rebounded around 7 percent
since its June 7 close and gained more than 3 percent this week.
Its emerging markets counterpart <.MSCIEF> outperformed and
was up more than half a percent.
Investors have gradually been moving back into riskier
assets this month after a sharp correction in May made
valuations more attractive and key volatility gauges, such as
Wall St's Vix <.VIX> index, almost halved from mid-May peaks.
Soothing investor tensions further, Spain's Treasury managed
to sell 3.5 billion euros of debt on Thursday, which a
government official said gave it enough liquidity to deal with a
24 billion euro ($29.4 billion) repayments crunch in July.
In addition, EU leaders and officials on Friday firmed up
plans to publish bank "stress tests" next month as they looked
to minimize adverse speculation that has been dogging the sector
all year.
Societe Generale <SOGN.PA>, BBVA <BBVA.MC> and Credit
Agricole <CAGR.PA> up 1.4-2.7 percent in a higher bank sector.
"There has been a slight change in sentiment," said Mike
Lenhoff, chief strategist at Brewin Dolphin Securities, in
London. "It looks like the (EU) policy effort is beginning to
come to fruition. Apart from the financial stability programme,
I quite like the idea of the stress test for the banks. Markets
have been oversold, giving a buying opportunity."
European stocks <> were 0.3 percent higher at midday.
Japan's Nikkei <> ended flat but had its biggest weekly
rise in three months. The dollar was little changed against a
basket of currencies <.DXY> and on the euro. U.S. stock futures
<SPU0> were flat.
EASING THE STRESS
"Financial system concerns have eased, and some players are
re-establishing carry trades, seeking higher-yielding assets,"
said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi
UFJ, summing up the mood.
Fund tracker EPFR Global reported that more than $37 billion
flowed out of money market funds during the latest week and into
high-yield and emerging market bond funds and global equity
funds. Emerging market equity finds saw the most net inflows in
10 weeks.
The euro held at three-week highs, on track for its second
straight week of gains. It was near $1.24 <EUR=> as investors
shed short positions after solid demand at the Spanish
government bond auction.
The single currency has gained more than 2 percent so far
this week, pulling further away from a four-year low of $1.1876
struck on June 7.
On debt markets, two-year bond yields <DE2YT=TWEB> were 3
basis points higher at 0.546 percent, with 10-year yields
<DE10YT=TWEB> up the same at 2.702 percent.
(Additional reporting by Mike Dolan, Brian Gorman, Tamawa
Desai; editing by John Stonestreet)
