Stocks, euro rise after Italy auction, U.S. data

Clocks showing the time of the different cities in the world are seen at the Warsaw Stock Exchange November 23, 2011.

NEW YORK (Reuters) - Global stocks and the euro rose on Tuesday on a rebound in U.S. consumer confidence and after an Italian debt sale met strong demand despite rates that analysts warned were unsustainable.

But stocks and the euro pared gains as euro zone ministers struggled to ramp up the firepower of the regional rescue fund and raised the possibility of asking the International Monetary Fund for more help.

U.S. benchmark 10-year Treasury notes briefly turned positive in price as large-cap U.S. stocks pared gains, driven by a decline in financial shares and weakness in the technology-rich Nasdaq index, which closed lower.

The euro traded up 0.2 percent higher at $1.3328.

European shares closed higher, extending a low-volume rally into a third day, on hopes policymakers will make progress toward containing the debt crisis even as Italy sold three-year debt at a euro-era lifetime high.

"It is a great sign that the auction was oversubscribed, suggesting that we seem to be moving forward with progress there," said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management.

"That said, the yields remain quite high, so we're not sounding an all-clear just yet," added Zemsky, who helps oversee $445 billion in assets.

Italy had to offer a record 7.89 percent yield to sell its debt, a stunning leap from the 4.93 percent it paid in late October.

The yields were above levels at which Greece, Ireland and Portugal were forced to apply for international bailouts.

However, investor sentiment was bolstered after the Conference Board, an industry group, reported U.S. consumer confidence bounced back in November from a 2-1/2-year low as worries about job and income prospects eased.

Wall Street rallied on the improved consumer confidence, another sign that the U.S. economy remains on the path of recovery, and on optimism that Europe is moving to resolve the two-year-old debt crisis.

The Dow Jones industrial average .DJI was up 32.62 points, or 0.28 percent, at 11,555.63. The Standard & Poor's 500 Index .SPX was up 2.64 points, or 0.22 percent, at 1,195.19. The Nasdaq Composite Index .IXIC was down 11.83 points, or 0.47 percent, at 2,515.51.

But weak financials shares weighed, with the S&P financial index .GSPF down 0.6 percent and shares of Bank of America (BAC.N) dropping 3.2 percent to $5.08 in their worst close since March 2009 -- the depths of the financial crisis.

"There seems to be some movement on the European front, but things certainly haven't been resolved. Financials are taking a step back, and are kind of keeping a cap on the market as a whole," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

AMR Corp AMR.N, the parent of American Airlines, plunged 84 percent to about 26 cents a share after it filed for bankruptcy protection and named a new chairman and chief executive. The stock was halted more than a dozen times throughout the day.

In Europe, the FTSEurofirst 300 .FTEU3 of leading regional shares closed up 0.75 percent at 947.89 points.

U.S. Treasury debt prices slipped as signs of a pickup in U.S. consumption eroded the safe-haven value of government debt though bond investors were cautious because of Europe.

The benchmark 10-year U.S. Treasury note was down 11/32 in price to yield 2.01 percent.

Crude oil prices pushed higher, lifted by enthusiasm over Italy's bond auction and as Iranian protesters stormed the British embassy in Tehran.

ICE Brent January crude rose $1.82 to settle at $110.82 a barrel, a penny above the front-month Brent 200-day moving average.

U.S. January crude rose $1.58 to settle at $99.79 a barrel.

U.S. December gold futures settled up $2.60 at $1,713.40 an ounce. (Additional reporting by Julie Haviv, Robert Gibbons, Caroline Valetkevitch, Chris Reese and Frank Tang in New York; Writing by Herbert Lash; Editing by Kenneth Barry)