* Stocks rise on Spanish austerity measures
* Euro loses bid as doubts on long term persist
* Gold sets record high at $1,244.45 per ounce
(Updates with U.S. closing prices)
By Albert H. Yoon
NEW YORK, May 12 (Reuters) - World shares climbed on
Wednesday after Spain outlined measures to cut its deficit,
easing fears that the Greek debt crisis could spread in Europe,
but doubts about the longer-term impact drove down the euro and
sent gold to record levels.
MSCI's all-country world stock index <.MIWD00000PUS>
climbed nearly 1.2 percent, led by Europe, where the
FTSEurofirst 300 <> index gained 1.3 percent.
Concerns that a debt crisis in Greece could spill over to
other euro-zone nations with high borrowings eased on Wednesday
as Spanish Prime Minister Jose Luis Rodriguez Zapatero said
Madrid would slash civil service pay by 5 percent this year,
freeze it in 2011 and cut 13,000 public sector jobs.
"There was some concern about whether Spain would be
serious about the measures it would have to take, so the moves
it's making" are positive, said John Massey, portfolio manager
at SunAmerica Asset Management in Jersey City, New Jersey.
Massey said cyclical companies with a lot of international
exposure, including those in the tech and industrial sectors,
had been especially vulnerable to the issues in Europe. Those
shares were among leaders on Wednesday.
Doubts about the longer-term prospects for debt-laden
European countries, however, persisted, and worries about
euro-zone growth also cast a cloud.
Gold hit a record high as investors sought assets seen as
havens from global instability, touching a $1,248.15 peak that
marked a 19.5 percent gain from February. Spot gold <XAU=> rose
$5.60, or 0.45 percent, to $1237.60.
The Dow Jones industrial average <> surged 148.65
points, or 1.38 percent, to 10,896.91. The Standard & Poor's
500 Index <.SPX> rose 15.88 points, or 1.37 percent, to
1,171.67 and the Nasdaq Composite Index <> added 49.71
points, or 2.09 percent, to 2,425.02.
The gold rally drove up shares of materials companies. The
PHLX gold and silver index <.XAU> gained 0.98 percent, while
Freeport-McMoRan Copper and Gold Inc <FCX.N> shares jumped 3.9
percent to $73. Technology and industrial shares also rose.
As investors shift attention from Europe's sovereign debt
troubles, the focus will return to the U.S. economic recovery,
though analysts predict choppy trading.
"The market has been increasingly conditioned to buy on the
dips now that the situation in Europe has been not resolved but
certainly stabilized in the short term," said Craig Peckham,
equity trading strategist at Jefferies & Co in New York.
EURO SHEDS GAIN
The pan-European FTSEurofirst 300 <> index of top
shares closed up 1.3 percent at 1,048.56 points. The index is
now up 0.3 percent for the year having dipped into negative
territory in early May on euro-zone sovereign debt concerns.
Financials were among the top gainers following drops in
previous sessions. Germany's Allianz jumped 3.4 percent after
first-quarter profit more than tripled.
The euro <EUR=> declined 0.28 percent at $1.2617. The
battered currency rose earlier after Spain announced its
austerity measures and data showed the euro-zone economy grew
modestly in the first quarter.
Germany's GDP grew for the fourth consecutive quarter in
the first three months of 2010, data showed on Wednesday.
Gains in the euro were short-lived, reflecting investor
worry over whether weaker euro-zone economies can deliver debt
cuts and the draining impact of austerity measures on Europe's
growth.
The dollar rose against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> up 0.48 percent
at 84.87. Against the Japanese yen, the dollar <JPY=> gained
0.47 percent at 93.12 yen.
U.S. Treasuries prices fell as the euro zone's attempts to
staunch its budget crisis helped stabilize stock markets and
traders braced for a 10-year bond auction.
Investors must absorb $78 billion of U.S. Treasury bonds in
auctions this week, including $24 billion of 10-year notes that
drew solid demand on Wednesday. Ten-year Treasury note yields
rose 0.05 percentage point to 3.58 percent.
"People like to see that fiscal responsibility talk coming
out of Europe, but I think it's more that we're watching
equities and they're stable and we have a lot of supply," said
Rick Klingman, managing director of Treasury trading at BNP
Paribas in New York.
Britain's FTSE 100 <> index was up 0.9 percent as
Conservative leader David Cameron took the position of prime
minister at the head of a coalition government.
Germany's DAX <> increased 2.4 percent and France's
CAC 40 <> rose 1.1 percent.
In energy and commodity trading, U.S. light sweet crude oil
<CLc1> fell 94 cents, or 1.23 percent, to $75.43 per barrel.
(Additional reporting by Jeremy Gaunt and Joanne Frearson
in London, and Rodrigo Campos, Burton Frierson and Wanfeng Zhou
in New York; Editing by Dan Grebler)
