Euro, stocks jump as cenbanks ready to act

A Tokyo Stock Exchange employee looks at a monitor as he works at the bourse in Tokyo June 4, 2012.

NEW YORK (Reuters) - Wall Street stocks rose and the euro strengthened against the U.S. dollar on Thursday after Reuters reported major central banks are ready to coordinate moves to keep markets operating smoothly by providing liquidity in case of turmoil following Sunday's elections in Greece.

Markets have been volatile this week as investors struggled for insights on the likely outcome of the pivotal vote that could determine whether Greece stays in the euro zone.

Central bankers stand ready to act to prevent a credit squeeze if market strains emerge after an unusual confluence of three elections this weekend, with important polls in France and Egypt as well.

U.S. stocks closed just off the session highs hit after the report while the euro extended gains against the greenback.

With the backdrop of coordinated action from central banks, "any reaction to what Wall Street would consider to be an adverse vote (in Greece) would be over fairly quickly," said John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

Manley, however, said rising yields in Spain and Italy will still keep markets under pressure. "I can't imagine it as the start of the big move up because there are still many issues out there."

Spain's 10-year yield was near 6.96 percent after it briefly topped the 7.0 percent mark, the level at which other highly indebted euro zone nations were forced to seek bailouts. Italian yields also rose as investors worried that Spain's financial problems would contaminate Italy as well.

Adding to the market bullishness, Britain and the Bank of England will flood banks with cheap long-term funding to encourage lending to businesses and consumers, and the British central bank will activate an emergency liquidity tool, BoE governor Mervyn King said in an annual speech to London financiers.

The Dow Jones industrial average .DJI gained 155.53 points, or 1.24 percent, to 12,651.91. The Standard & Poor's 500 Index .SPX gained 14.22 points, or 1.08 percent, to 1,329.10. The Nasdaq Composite Index .IXIC gained 17.72 points, or 0.63 percent, to 2,836.33. The MSCI world equity index .MIWD00000PUS added 0.35 percent.

The U.S. benchmark 10-year Treasury note was down 12/32 in price, while the yield rose to 1.6386 percent. <US/>

Greek banking stocks .FTATBNK jumped more than 23 percent amid market talk that secret opinion polls showed a bailout-friendly government was likely to emerge after the election. Greek law forbids the publication of opinion polls in the two weeks ahead of a vote.

U.S. oil futures jumped 2 percent, extending the rally late on the report about central banks' preparedness. Oil rose earlier after the Organization of the Petroleum Exporting Countries agreed to keep its collective oil output ceiling unchanged. <O/R>

(Reporting by Rodrigo Campos, Editing by Gary Crosse)