GLOBAL MARKETS-US stocks rise, cheered by jobless claims; euro up

* U.S. jobless claims' fall bolsters risk appetite

* Euro rises from recent lows, Wall Street shares higher

* Oil up on Mideast tension

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 11 (Reuters) - U.S stocks rose after four days of losses on Thursday, while the euro pulled away from recent lows as investor appetite for riskier assets increased after jobless benefit claims in the world's largest economy fell to their lowest in more than four years.

European equities, which had started the day on the defensive, and commodities such as crude oil also benefited from the upbeat jobless claims report.

"The data plays to the tune that the prior decline in claims is not a fluke, and that U.S. labor conditions are if anything improving," said Alan Ruskin, head of G10 FX strategy, at Deutsche Bank in New York. "Nothing here to depress the better start for risk today."

The Dow Jones industrial average gained 0.4 percent, to 13,397.40, while the Standard & Poor's 500 Index rose to 1,441.44 points, up 0.6 percent, its first gain in five days. The Nasdaq Composite Index also advanced, climbing 0.7 percent to 3,073.79 points.

In the currency market, the euro was the primary beneficiary of improved market sentiment, as it pulled away from a more than one-week low. It was last at $1.2948, up 0.6 percent, rising for the first time in four days.

Spanish bond yields, however, rose to near the critical 6.0 percent mark after a heavy credit downgrade of Spain from ratings firm Standard & Poor's, although hopes it could help persuade Madrid to take a bailout partly supported European stocks, analysts said.

S&P cut Spain's rating two notches to BBB-minus, one step from junk status, late on Wednesday, warning that an intensifying recession and poor response from euro zone policymakers to the crisis had left Spain highly vulnerable.

Markets expect Spain to be the first of the euro zone's "big four" economies to require a rescue package.

Spanish bonds fell, with 10-year yields rising to 5.85 percent, edging back towards the 6.0 percent level that economists see as too expensive to sustain.

"We are working on the assumption that Spain will make a request for aid and so the only uncertainty comes from pinning down exactly when that will occur," said Nick Matthews, Senior European economist at Nomura in London.

EUROPEAN EQUITIES

Pan-European equities swung back into positive territory by mid-morning on hopes the S&P downgrade, and calls from the head of the IMF, Christine Lagarde, for urgent action, would shepherd Spain into an aid request and pave the way for the ECB to buy its bonds.

Lagarde said in Tokyo that political wrangling was adding to global economic uncertainty and prodded the world's rich countries to take swifter action as Europe's debt crisis drags on.

The Euro STOXX 50, which has lost 3.0 percent since the start of the week, clawed back from early morning falls.

Germany's DAX, France's CAC, London's FTSE also reversed losses, including Madrid's IBEX and Milan's FTSE MIB.

S&P's timing for its Spanish downgrade did not help fellow euro zone struggler Italy, as its borrowing costs rose to the highest since mid-July -- before the ECB's pledges to keep the euro intact -- at an auction of 6 billion euros of mainly three-year bonds..

MIDDLE EAST TENSIONS PERSIST

Tensions in the Middle East also played a factor in Thursday's higher oil prices. U.S. crude futures rose 1.7 percent to $92.84 per barrel.

Turkey scrambled fighters and briefly detained a Syrian passenger plane on Wednesday, suspecting it of carrying military equipment from Moscow, while Turkey's military chief warned of a more forceful response if shelling continued to spill over the border.

Gold was up 0.5 percent at $1,771.20 after dropping more than 1 percent over the last four sessions, although gloom over the euro zone debt crisis that is supporting the dollar is expected to dull some of its shine.