* Banks recover to boost European stock markets
* Dollar index dips but still close to recent highs
* Greek yield spread widens on continued fiscal worries
(Updates prices, adds fresh comment)
By Nigel Stephenson
LONDON, Dec 21 (Reuters) - European shares rose on Monday,
led by banks, while the euro stayed weak against the dollar on
worries over Greek debt and expectations the U.S. economy may
recover more quickly than the euro zone.
The rise in shares -- an index of leading European stocks
<> was up 0.6 percent -- helped push safe-haven euro zone
government bonds lower. Gold steadied after hitting multi-week
lows last week, but gains were capped by the firm dollar, and
crude oil prices rose.
Banks were the top gainers among European shares, recovering
from concerns over tougher capital regulation. The banks <.SX7P>
rebounded after losses last week following proposed new rules
from the Basel Committee on banking supervision.
"Sovereign risks and banks have been the main worry that the
markets have been adjusting, but I think that's well priced in
now," said Bernard McAlinden, investment strategist at NCB
Stockbrokers in Dublin.
Heavyweight oil producers rose as crude prices stayed firm
after a 1 percent rise on Friday.
London Stock Exchange <LSE.L> rose after it agreed to take a
60 percent stake in rival trading platform Turquoise and merge
it with its own "dark pool" platform Baikal.
Japan's Nikkei average <> rose 0.4 percent to an
eight-week closing high on gains in high-tech exporters such as
chip-tester Advantest Corp <6857.T> and boosted by a weaker yen.
U.S. stock index futures rose, pointing to a firm start on
Wall Street. Futures for the Dow Jones average <DJc1>, S&P 500
<SPc1> and Nasdaq Composite <NDc1> were up 0.2-0.4 percent.
The euro stayed weak against the dollar on persistent
concerns over the fiscal health of Greece. The dollar was also
supported by the brighter outlook for the U.S. economy after
stronger job market and retail sales figures last week.
The euro <EUR=> was all but flat on the day at $1.4359,
after falling to its lowest since September on Friday. The
dollar index <.DXY>, which measures the greenback's performance
against a basket of six currencies, was down 0.13 percent but
still close to its highest for almost three months.
"It looks like we may be seeing better growth prospects in
the U.S. than the euro zone. Better employment and retail sales
data in the U.S. has raised the possibility of a cyclical
recovery in 2010," ING currency strategist Chris Turner said.
GREECE WEIGHS
Euro zone government bonds fell as shares rose but trade was
thin ahead of the holiday season. Worries about Greece hit its
government bonds in recent weeks. Standard and Poor's and Fitch
have already cut their credit ratings on Greece.
March Bund futures <FGBLc1> were down 28 ticks at 123.38 and
benchmark German 10-year bonds were yielding 3.16 percent, up 2
basis points. The premium investors demand to hold Greek debt
rather than German rose around 18 basis points to 281.
"The periphery is probably going to remain the focus but
trading has been thin anyway the last few sessions and that is
unlikely to change," a trader said.
Oil held firm above $73 a barrel, after a 1 percent rise on
Friday, as Iranian troops partly withdrew from a disputed oil
area claimed by Tehran and Baghdad, easing tensions between two
major crude exporters.
Crude for January delivery <CLc1> rose 16 cents to $73.52 a
barrel. London Brent crude <LCOc1> was up 73 cents at $74.48.
Gold prices steadied but gains were capped by recent dollar
strength. Spot gold <XAU=> was at $1,113.50 an ounce, compared
with $1,112.25 in New York late on Friday.
(Additional reporting by Charlotte Cooper, Dominic Lau, Jessica
Mortimer and Kirsten Donovan; Editing by Toby Chopra)
