GLOBAL MARKETS-EU crisis deal sends stocks, euro to 2-mo high

* World stocks hit highest in eight weeks

* Euro at seven-week high vs dollar after summit deal

* Safe-haven Treasuries, Bunds fall; Greek, Italian yields ease

By Dominic Lau

LONDON, Oct 27 (Reuters) - World stocks and the euro rose to their highest levels in nearly two months on Thursday after European leaders struck a deal to resolve the two-year-old euro zone sovereign debt crisis, which threatens the survival of the common currency.

Brent crude and copper prices also rallied. Prices of safe-haven U.S. Treasuries and German Bunds fell while those of highly indebted euro zone countries gained.

As concerns of a near-term default eased, the cost of insuring Greek debt against default also fell.

The deal, announced in the early hours of Thursday, will see private holders of Greek bonds accept a 50 percent loss on their investment, while banks will be recapitalised and the size of the currency bloc's rescue fund will be leveraged to 1 trillion euros ($1.4 trillion).

"Full credit to them for achieving something, even if it's not the be-all and end-all that we'd all really like. But it takes us further away from the edge of the abyss for the time being," Nomura rate strategist Sean Maloney said.

Europe's FTSEurofirst 300 gained 3 percent, while European bank shares , which have been hit by concerns that a Greek default would lead to a banking crisis, surged nearly 7 percent, with Greek bank stocks up more than 10 percent.

Greece's benchmark stock index climbed 6 percent and yields on 10-year Greek government bonds fell 29.5 basis points to 24.728 percent. Yields on Italy's 10-year debt slipped 11.6 basis points to 5.814 percent, also helped by the European Central Bank's bond buying, traders said.

U.S. stock index futures put on 1.7 to 2.1 percent, indicating a firm opening on Wall Street, ahead of the release of the U.S. third quarter GDP data at 1230 GMT.

World stocks measured by the MSCI All-Country World Index advanced 1.9 percent to hit their highest level since early September.

The global benchmark is up 10.9 percent so far this month, on track for its biggest monthly gain in more than two years, driven by hopes that euro zone policymakers would announce a decisive plan to end the turmoil at the summit.

Copper was up 4.2 percent on Thursday and on track for its best weekly percentage gain since January 2009, while Brent crude rose 1.8 percent to above $110 a barrel.

Safe-haven gold dipped 0.3 percent to above $1,720 an ounce, its first fall in a week.

TOUGH ROAD AHEAD

But analysts said more work would still be needed to solve the bloc's problems.

"It would be clearly premature to declare the euro crisis as fully resolved. Much more needs to be done, especially regarding fiscal consolidation," Credit Suisse Private Banking said.

"Achieving such a consolidation will be difficult in a phase of slow growth, or in some cases recession."

"Nevertheless, it is our impression that EU leaders have made significant progress on all fronts. This suggests that the rebound in risk assets that has been underway in recent days may well continue for some time."

The euro was up 0.9 percent at $1.4025 and 0.3 percent at 106.31 yen.

"The market was short risk and long dollars, so this has boosted the euro. But above $1.40, the air is a bit thin for the euro and it is likely to struggle there," Paul Robson, currency strategist at RBS Global Banking, said.

The announcement also boosted high-yielding currencies, with the Australian dollar up 2.2 percent at $1.0625.

The dollar zeroed in on a record low against the yen after the Bank of Japan, as widely expected, decided to ease policy by expanding asset purchases by 5 trillion yen ($65.8 billion), to 20 trillion yen.

The dollar was down 0.5 percent at 75.82 yen , not far from the record low of 75.71 yen plumbed the day before.