GLOBAL MARKETS-U.S. stocks rise with banks; bonds higher

* MSCI world index down on worries on global economy

* U.S. stocks rise with financials

* China growth data, French rating threat weigh

* Government bonds up, dollar, euro near flat (Updates prices, adds details)

By Caroline Valetkevitch

NEW YORK, Oct 18 (Reuters) - U.S. stocks rose on Tuesday, buoyed by a jump in financial shares on results from Bank of America (BAC.N) and other big banks, bucking a downturn in other markets that were hit by fears over the global economy.

Slower-than-expected Chinese growth and a warning by Moody's to France over risks to maintaining its top credit rating kept investors on edge, boosting safe-haven government bonds.

The Moody's warning compounded investor jitters after Germany's finance minister on Monday warned that it was not realistic to expect a definitive solution to the euro zone debt crisis to be reached at a key European Union summit to be held on Sunday.

The U.S. benchmark Standard & Poor's 500 index .SPX was up more than 1 percent. Shares of Bank of America, the second-largest U.S. bank by assets, rose 6.8 percent to $6.44 after the bank reported a quarterly profit. Shares of Goldman Sachs (GS.N) rose 1.9 percent at $98.73 even after it reported a wider-than-expected quarterly loss.

"There was some genuine panic the banks, the financials, were going to start reporting earnings that were going to just undermine any shred of confidence and any kind of sustainable rebound. And, really, the earnings haven't done that," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

The Dow Jones industrial average .DJI was up 123.63 points, or 1.08 percent, at 11,520.63. The Standard & Poor's 500 Index .SPX was up 16.63 points, or 1.38 percent, at 1,217.49. The Nasdaq Composite Index .IXIC was up 22.95 points, or 0.88 percent, at 2,637.87.

Robust U.S. profits have driven much of the U.S. stock market's gains from the March 2009 lows, but investors have worried that corporations will be unable to sustain that profit growth in a sluggish global economic climate.

S&P 500 financials earnings are expected to have increased just 3 percent from a year ago, while S&P 500 earnings as a whole are expected to have risen 13 percent, according to Thomson Reuters data.

In Europe, however, bank shares fell sharply on Tuesday, with French banks among the worst hit after Moody's warned on the outlook for France's credit rating.

Moody's cautioned it may slap a negative outlook on France's Aaa credit rating in the next three months if costs from helping to bail out banks and other euro zone members stretch its budget too thin. For details, see [ID:nN1E79G1VP]

The FTSEurofirst 300 index .FTEU3 closed down 0.4 percent at 962.13 points. Shares of French banks Societe Generale (SOGN.PA), BNP Paribas (BNPP.PA) and Credit Agricole (CAGR.PA) all lost between 3.3 percent and 5 percent.

The MSCI world equity index .MIWD00000PUS was down 0.2 percent, well off its earlier lows. The world index is still up roughly 11 percent from a 15-month low earlier this month. Emerging stocks .MSCIEF lost 1.9 percent.

Optimism over the EU summit on Oct. 23 waned after Germany's finance minister, Wolfgang Schaeuble, said on Monday that even though European governments would adopt a five-point platform to address the crisis, a definitive solution would not be reached at the Oct. 23 EU summit.[ID:nL5E7LH1GL]

"While some people are reconsidering their stance of an absolute worst-case scenario (on the global economy) and it's a stance that we don't necessarily agree with, for the most part the market still has a very cautious approach where people are not willing to go on a limb one way or the other," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

Still, Germany's chancellor Angela Merkel expects European leaders to produce a "work plan" for Greece at the summit, possibly including a permanent mission of international lenders to monitor its debts, sources from her party quoted her as saying on Tuesday.

In Asia, China's economic growth in the third quarter slowed to its weakest pace since the 2009 second quarter. Growth eased to 9.1 percent in the July-September period at an annual rate, slightly below forecasts of 9.2 percent.

U.S. Treasuries edged higher, pushing benchmark yields to their lowest in two weeks.

Benchmark 10-year Treasury prices US10YT=RR rose 9/32 in price to yield 2.12 percent compared with 2.18 percent late on Monday. Yields fell as low as 2.08 percent, their lowest since Oct. 7.

U.S. 30-year bond prices briefly trimmed gains after Federal Reserve Chairman Ben Bernanke said the Fed is open to the possibility of using monetary policy tools to stabilize the financial system.

Earlier, the French/German 10-year government bond yield spread FR10YT=TWEB widened to a euro-era record of 101 basis points. French debt also underperformed that of the Netherlands, its triple-A rated peer.

Brent crude oil prices LCOc1 rose, extending gains along with U.S. stocks, while the dollar .DXY was up just 0.3 percent against a basket of major currencies. The euro EUR= was last down 0.06 percent at $1.3740.

Apple Inc. is (AAPL.O) due to report results on Tuesday after the market close. Its shares were up 0.2 percent at $420.84, reversing earlier losses. (Reporting by Caroline Valetkevitch; additional reporting by Natsuko Waki in London and Chuck Mikolajczak and Gertrude Chavez-Dreyfuss in New York, Editing by Chizu Nomiyama)