GLOBAL MARKETS-Stocks rally, euro gains on Greece optimism
* Greek govt expected to win confidence vote late Tuesday
* Euro's gain sparks relief rally, but strength a concern
* Risky assets rise even as safe-haven gold also climbs
* Volumes light as investors reticent to place new trades (Updates activity and prices)
NEW YORK, June 21 (Reuters) - Global stocks jumped and the euro rose on Tuesday after slipping to three-week lows last week as investors speculated Greece will avoid a debt default, making risky assets once again attractive.
Investors bet that Greek Prime Minister George Papandreou would survive a confidence vote in parliament, a key hurdle the country must clear to avert a debt default. The vote is due around 5 p.m. New York time (2100 GMT). For details see [ID:nL6E7HL0C1]
World stocks have tumbled almost 8 percent from three-year highs set in May as investors worried a disorderly restructuring of Greek debt would roil global markets and hit banks in Europe and elsewhere.
Euro-zone finance ministers said the Greek government had until July 3 to approve new steps to get the next installment of 110 billion euros in aid from the European Union and International Monetary Fund.
"All eyes are on the Greek vote of confidence on Papandreou ... people are still hoping for the best rather than fearing for the worst," said analyst Leon Westgate at Standard Bank in London.
WALL ST REACTS TO HOUSING
Data showed U.S. sales of existing homes fell 3.8 percent in May, less than some had feared, accelerating losses in U.S. government debt and extending gains on Wall Street. [ID:nN1E75K0HN]
European shares rose at their fastest pace in two months, bouncing off three-month closing lows.
The FTSEurofirst 300 index .FTEU3 of top European shares added 1.4 percent to a provisional close of 1,096.51. The MSCI world equity index .MIWD00000PUS was up 1.5 percent for the day. An index of emerging market stocks .MSCIEF rose 1.4 percent.
On Wall Street, the Dow Jones industrial average .DJI was up 102.06 points, or 0.85 percent, at 12,182.44. The Standard & Poor's 500 Index .SPX was up 15.99 points, or 1.25 percent, at 1,294.35. The Nasdaq Composite Index .IXIC was up 48.61 points, or 1.85 percent, at 2,678.31.
The Federal Reserve began a two-day meeting that ends on Wednesday, with Fed watchers preoccupied by the question of an economy that is slowing while underlying inflationary pressures builds. [ID:nN1E75I073]
Oil declined at midday, reversing earlier gains in choppy trading before the expiration of the U.S. July crude contract at the end of today's session. On Monday, crude had sunk to a four-month low.
The euro gained against the U.S. dollar. U.S. debt prices fell ahead of the release of U.S. housing data. [ID:nL3E7HL0RQ] [ID:nL6E7HL0C1]
The euro EUR=EBS was up 0.6 percent at $1.43971. In contrast, the U.S. dollar index .DXY shed 0.5 percent.
Traders said the euro's gain sparked a relief rally, although many questioned its strength.
"Everything appears to be related to the bounce in the euro. It's a bit of a relief rally that has triggered some short covering," Westgate said, referring to a 1 percent bounce in copper prices.
U.S. light crude for July delivery CLc1 dipped 5 cents, or 0.05 percent to $93.21 in choppy trading on its expiration day. ICE Brent LCOc1 for August delivery slipped 75 cents to $110.94.
Traders said that even if Papandreou's cabinet survives the confidence vote, the euro's gains would be short-lived as it would not necessarily guarantee that Greece will be able to pass new austerity measures on June 28.
"We should see cautious trading ahead of the Greek vote and if it is passed, euro/dollar should react positively," said Roberto Mialich, currency strategist at Unicredit in Milan, who expected gains to be capped below $1.4450.
"The picture is so uncertain about the euro zone periphery that it will prevent big investors from taking large directional positions," Mialich said.
Bond prices fell. The benchmark 10-year note US10YT=RR slipped 6/32 in price to yield 2.98 percent.
Gold prices rose, lifted by investors still worried about a possible Greek debt default and financial contagion. [ID:nLDE75K0VL]
Spot gold XAU= was bid at $1,545.54 a troy ounce. (Additional reporting by Gertrude Chavez-Dreyfuss, Angela Moon and Karen Brettell in New York; Ikuko Kurahone and Pratima Desai; Blaise Robinson in Paris; Writing by Herbert Lash; Editing by Kenneth Barry and Jan Paschal)