* World stocks rally for ninth-straight session
* Euro holds near 3-week high versus U.S. dollar
* U.S. debt prices fall in light volume
* Gold hits record on safe-haven demand
(Updates with close of European markets)
By Herbert Lash
NEW YORK, June 18 (Reuters) - World stocks gained for a
ninth straight day on Friday as risk appetite rose after a
Spanish bond auction eased investors' worst fears about
sovereign debt in Europe, helping the euro hold near three-week
highs.
U.S. and European shares retraced all their losses for the
year as banks in Europe gained even as questions arose over a
pledge by European Union leaders to publish details of "stress
tests" on the health of the banking sector. For details see:
[]
Analysts suggested the tests to be published in July would
boost investor confidence in European banks.
The euro headed toward its biggest weekly gain in more than
a year on the Spanish bond auctions, while the U.S. dollar
appeared increasingly vulnerable to further losses after
falling below a key level. []
German government bonds fell and peripheral issues rallied
with immediate pressures over Spain's fiscal health easing
after the successful debt auction, and as equities and the euro
rose. []
The risk premium that investors demand to hold Spanish debt
rather than German benchmark bonds fell to 192 basis points
after hitting a euro lifetime high of 238 on Thursday.
"We think concerns about Spain's refinancing risk are
excessive, and the current price action has gone too far," said
Laurence Mutkin, analyst at Morgan Stanley in London.
"However, concerns about the Spanish banking sector are
likely to persist, and we perceive nearly all the event risk to
be on the downside," he said.
Spanish stocks <> rose 2.2 percent, lifted by a rally
in bank shares.
European shares rose for the eighth consecutive session,
the longest winning streak in 11 months, also boosted by
banks.
Societe Generale <SOGN.PA> Credit Agricole <CAGR.PA> and
UBS <UBSN.VX> gained 1.7 to 6.1 percent.
The pan-European FTSEurofirst 300 <> index of top
shares closed up 0.3 percent at 1,044.52 points, its highest
close since May 13.
"A positive day, but there is still a lot of resistance on
the top side," said Phil Roberts, technical analyst at Barclays
Capital.
MSCI's all-country world index <.MIWD00000PUS> gained about
0.2 percent. The index has rebounded around 7 percent since its
June 7 close and gained about 3 percent this week.
Its emerging markets counterpart <.MSCIEF> outperformed and
was up almost 0.7 percent.
U.S. stocks were largely higher and were set for
back-to-back weekly gains, though the market was choppy as
investors braced for volatility ahead of the expiration of
stock options. []
Basic materials stocks took the lead as Wall Street traded
in a very tight range near break-even.
"Traders are responding to the assignment and exercise of
options and hedging that exposure. It makes things volatile, in
a range," said Frank Lesh, futures analyst and broker at
FuturePath Trading LLC in Chicago.
Before 1 p.m., the Dow Jones industrial average <> was
up 3.02 points, or 0.03 percent, at 10,437.19. The Standard &
Poor's 500 Index <.SPX> was down 0.56 points, or 0.05 percent,
at 1,115.48. The Nasdaq Composite Index <> was down 4.21
points, or 0.18 percent, at 2,302.95.
The euro slipped below $1.24 in afternoon trading after
trading higher earlier in the session.
The euro <EUR=> was down 0.15 percent at $1.2359. Against
the yen, the dollar <JPY=> was down 0.33 percent at 90.68.
The dollar rebounded against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.03 percent at 85.713.
"We had some nice euro gains and dollar weakness over the
course of this week. We're going to see whether the euro is
going to sustain these gains and press on toward $1.25," said
Brian Dolan, chief strategist at Forex.com in Bedminster, New
Jersey.
U.S. Treasury prices drifted lower in light trading as the
market cleaved tightly to a yield range established over the
past week and a half and the day's planned events held little
for investors looking for tradable Treasury price influences.
[]
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 5/32 in price to yield 3.21 percent.
Oil prices rose a bit, but copper, a proxy for growth in
China and other emerging countries, hit a one-week low.
U.S. light sweet crude oil <CLc1> rose 4 cents, or 0.05
percent, to $76.83 a barrel.
Investors in commodities overlooked increased risk appetite
in the wider markets as oil and copper prices faltered on signs
economic growth in the United States and China may not be as
rapid as expected. []
A Chinese official said growth was expected to slow in the
second half of this year and that double-digit growth for the
full year seemed unlikely. []
The warning, which prompted a sell-off in Chinese equities,
followed U.S. data on Thursday showing jobless claims increased
unexpectedly last week as the manufacturing, construction and
education sectors shed workers. []
"The recovery is going to be quite slow in a number of
countries," said Daniel Smith, an analyst at Standard
Chartered.
Gold rallied to a record high near $1,260 an ounce as
momentum triggered by buying of the metal as a haven from
sovereign and financial risk pushed prices through technical
resistance to near their previous peak. []
"Sovereign debt worries, central banks raising their
holdings and record low interest rates keep attracting new
buyers to gold," said Saxo Bank senior manager Ole Hansen.
"The Goldilocks scenario continues. Risk-off helps gold
through safe haven (buying), risk-on helps it as well through a
weaker dollar."
Spot gold prices <XAU=> rose $15.80, or 1.27 percent, to
$1,260.10, just off a record high of $1,260.20. U.S. gold
futures for August delivery <GCQ0> hit a record $1,262.00.
(Reporting by Wanfeng Zhou, Emily Flitter in New York;
Christopher Johnson, George Matlock in London; Writing by
Herbert Lash; Editing by Leslie Adler)
