* MSCI world equity index up 0.8 pct at 316.95
* Focus on ECB to deliver anti-crisis measures
* Euro extends gains; German government bonds fall
By Natsuko Waki
LONDON, Dec 2 (Reuters) - World stocks rose for a second
straight day on Thursday while the euro extended its hefty gains
as expectations grew the European Central Bank might deliver
measures to alleviate worries over euro zone debt.
The cost of insuring peripheral euro zone debt against
default eased and yield spreads of peripheral issues over German
Bunds also narrowed as hopes grew for decisive steps to stop the
crisis from spreading to larger economies such as Spain.
Analysts cautioned there was scope for disappointment,
saying the ECB was unlikely at this stage to expand its bond
purchase programme [].
"The focus is on whether (ECB President Jean-Claude) Trichet
will announce a numerical target for bond purchases," said
Roberto Mialich, currency strategist at Unicredit in Milan.
"If he keeps to saying they are ready to buy more bonds but
without a numerical target, the markets will be disappointed and
turn negative on the euro."
MSCI world equity index <.MIWD00000PUS> rose 0.8 percent to
a one-week high, having hit its weakest level in nearly two
months earlier this week.
Despite recent volatility, the MSCI index is still up 5.8
percent on the year, having risen more than 31 percent last
year.
U.S. stock futures rose around 0.3 percent <SPc1>, pointing
to a firmer open on Wall Street.
The FTSEurofirst 300 index <> rose half a percent
while emerging stocks <.MSCIEF> gained 1.2 percent.
PREVENTING CONTAGION
The euro gained 0.4 percent to $1.3194 <EUR=> after posting
its biggest one-day rise in more than a month on Wednesday from
an 11-week low on Tuesday. The dollar <.DXY> fell 0.3 percent
against a basket of major currencies.
"Decisive action by governments and the ECB would be
required to prevent a further deterioration of funding
conditions for European sovereigns and banks," Morgan Stanley
said in a note to clients.
"However, the steps that are likely to be taken in the near
term probably won't suffice to end the crisis and prevent a
spreading of debt worries from the periphery into the core,
which has been our dreaded base case all year."
The yield premium for 10-year Spanish bonds <ES10YT=TWEB>
over their German counterparts <DE10YT=TWEB> fell, indicating
less investor unease over Madrid's ability to finance itself.
Five-year credit default swaps for Greece, Ireland, Spain
and Portugal fell.
The spread between 10-year Spanish and German debt narrowed
for a second day, by 10 basis points to 246 basis points, down
from a euro lifetime high of 290 basis points struck on Monday.
Bund futures <FGBLc1> fell 50 ticks.
U.S. crude oil <CLc1> was up 0.1 percent to $86.87 a barrel,
staying near a three-week peak.
(Additional reporting by Tamawa Desai, editing by Stephen
Nisbet)
