GLOBAL MARKETS-Stocks gain on hopes for Europe debt action
* Speculation grows that ECB will aid ailing regional banks
* Stocks jump, but bond prices also gain, on pessimistic view
* Oil prices gain as fears of euro zone contagion ease
By Herbert Lash
NEW YORK, May 29 (Reuters) - Global equity markets jumped on Tuesday on signs of a new strategy to deal with Europe's debt crisis, but bond prices held on to gains on concerns about Spain's banking system.
U.S. and European stocks extended gains, with Spanish stocks trimming heavy losses, on mounting hopes the European Central Bank will help ailing euro zone banks, traders said.
Speculation also centered on a meeting of the European Commission on Wednesday when the commission will set out its economic strategy for the euro zone and possibly shift its emphasis from austerity to growth.
European Commission President Jose Manuel Barroso said on Tuesday that euro zone countries should come up with a timetable to reach full economic union to reassure investors about the future of the single currency bloc.
"We've got a ray of sunshine breaking out over Europe this morning that is spilling across the Atlantic," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
Traders also appear to be anticipating better-than-expected economic news this week. May jobs and Institute for Supply Management reports are due on Friday, he said.
The FTSEurofirst 300 rose 0.9 percent at 992.68, and MSCI's all-country world equity index rose 1.1 percent to 304.10. Spain's IBEX was down 1.8 percent, paring a full percentage point of losses.
U.S. stocks rose on hopes China may unleash more spending measures to stem a slower pace of economic growth, while Greek election polls pointed to support for pro-bailout parties.
The Dow Jones industrial average was up 141.56 points, or 1.14 percent, at 12,596.39. The Standard & Poor's 500 Index was up 14.67 points, or 1.11 percent, at 1,332.49. The Nasdaq Composite Index was up 36.13 points, or 1.27 percent, at 2,873.66.
The official Shanghai Securities News, citing unidentified sources, reported that China's biggest banks appear to have accelerated lending as Beijing starts to fast-track its approval of infrastructure projects in an effort to spur sagging growth.
Investors were also encouraged by weekend polls in Greece that showed the conservative New Democracy party, which backs the country's international bailout, has a lead over the leftist SYRIZA party, which opposes it ahead of a June 17 election.
Markets barely reacted after a private sector report showed U.S. consumer confidence unexpectedly cooled in May, falling to the lowest level in four months, as Americans became more pessimistic about the job market and economic outlook.
Another report showed U.S. home prices edged higher for the second month in a row in March, suggesting prices are stabilizing as the housing recovery gains momentum.
U.S. government debt prices rose and the yield on Germany's 10-year bond hit a fresh record low as doubts grew over Spain's plan to recapitalise its banks and obtain finance for its struggling regional governments.
The benchmark 10-year U.S. Treasury note was up 5/32 in price to yield 1.73 percent. Benchmark 10-year German Bund yields touched a new low before edging up to 1.369 percent.
The June Bund futures contract also hit a record high of 144.58, but later traded down at 144.29.
The euro traded down about 0.1 percent at $1.2530. The U.S. dollar index was down 0.18 percent at 82.257.
Crude oil rose above $107 a barrel on hopes for Chinese economic stimulus, though fears of euro zone debt contagion and of Middle East supply disruptions limited any gains.
Brent crude for July delivery rose 39 cents to $107.50 per barrel.
U.S. light sweet crude oil rose $1.03 cents to $91.88 a barrel.
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