GLOBAL MARKETS-World stocks rise on talk of G20 action

* Fear of Greek election results hangs over markets

* Bond prices rise, but euro rebounds as some concerns ease

* Nagging signs of slowing U.S. economy drive safe-havens

By Herbert Lash

NEW YORK, June 15 (Reuters) - World equity markets rose on F riday as investor fears of euro zone turmoil following Greek elections this weekend were offset by talk the world's major central banks stand ready to make a coordinated response to ease any market dislocation.

The euro rebounded and U.S. stocks shrugged off a new batch of weak factory data, while U.S. consumer sentiment fell in early June to a six-month low, according to a survey.

But anxiety that Greece could fail to form a government after Sunday's elections led investors to raise their safe-haven bond holdings, driving up U.S. government debt prices.

A measure of market fear in the equities market, the CBOE Volatility Index, was up 2.2 percent at 22.16, after rising above 23.

"Ahead of Sunday's election in Greece, central bankers stand ready, again," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

"With all the water central banks have expended out of their fire hoses over the past few years in their attempt to 'do something,' I can only think of magic candles. Those candles you blow out that only flare up again immediately after."

Central banks from Tokyo to London prepared for any turmoil following Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Officials from the Group of 20 major industrial and emerging nations told Reuters on Thursday that the top central banks stand ready to stabilize markets by providing liquidity if the election result causes financial upheaval.

G20 leaders meet in Mexico on Monday and Tuesday as the results of the Greek vote and market reactions emerge.

On Wall Street, the Dow Jones industrial average was up 93.35 points, or 0.74 percent, at 12,745.26. The Standard & Poor's 500 Index was up 10.99 points, or 0.83 percent, at 1,340.09. The Nasdaq Composite Index was up 29.05 points, or 1.02 percent, at 2,865.38.

In Europe, the FTSE Eurofirst 300 index of top European shares closed up almost 1.0 percent, with European bank stocks climbing 1.8 percent.

MSCI's all-country world equity index rose 1.0 percent to 305.34, and emerging markets gained 1.2 percent.

Disappointing data showed a worsening U.S. economy that increases the chance the Federal Reserve will announce an extension of its Operation Twist program, or launch a new quantitative easing program, when it meets next week.

"There are a lot of concerns going into the weekend with the Greek election," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago.

Yields on the 10-year U.S. Treasury note fell at one point to 1.564 percent, the lowest in about 10 days. The note later traded to yield 1.5891 percent, with prices up 15/32.

German Bund futures, another traditional safe haven, extended gains, accelerating their rise after the release of the U.S. economic data. Bund futures rose to 142.27, up 44 ticks on the day.

U.S. manufacturing output contracted in May for the second time in three months, the Fed said, and the New York Fed's "Empire State" index fell in June to the lowest level since last November. The Thomson Reuters/University of Michigan's index on consumer sentiment fell to 74.1 in June.

The euro hit a session low of $1.2590 against the dollar, but then rebounded to be up 0.1 percent at $1.2642.

The U.S. dollar index fell 0.5 percent to 81.595.

Brent crude edged up in thin trade, while U.S. crude seesawed near flat for most of the session. A weaker dollar, along with gains on Wall Street, lent some support to oil.

Brent crude settled 44 cents higher at $97.61 a barrel. U.S. crude rose 12 cents to settle at $84.03 a barrel.

Spot gold prices rose $4.07 to $1,626.90 an ounce.