* Investors welcome Greek rescue package
* Riskier assets advance, peripherals bonds rise
* Focus shifts to U.S. debt ceiling talks
By Anirban Nag
LONDON, July 22 World stocks hit a two-week high on Friday, while the euro and oil prices rose as a stronger than expected new rescue package for Greece allayed immediate concerns about the spread of Europe's debt crisis.
The dollar was subdued, however, as uncertainty intensified as to whether U.S. lawmakers could strike a last-minute deal to raise the country's $14.3 trillion debt ceiling and avoid their own default.
Many economists also warned that the Greek deal would not draw a line under Europe's problems in the longer-term, highlighting the risks to its quick implementation and whether political leaders could sell it to their respective countries.
"The deal is positive. A debt/growth deal is the only solution for an insolvent country and that is what the EU has done, but political and implementation risks remain," said Lena Komileva, global head of G10 currency strategy at Brown Brothers Harriman.
At an emergency summit on Thursday, euro zone leaders promised a second bailout with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.
The region's rescue fund, the European Financial Stability Facility, will be allowed to buy bonds in the secondary market if necessary and also to lend governments money to recapitalise banks.
The broad nature of the deal -- it involves private investors and actively cuts Greece's debt burden -- raised optimism that investors may now hold off with a fresh attack that could trouble Spain and Italy.
They took in their stride a statement by Fitch that it would declare Greece in restricted default on its debt -- seen as an expected consequence of Thursday's deal.
MSCI world equity index rose 0.5 percent to its highest in two weeks. European stocks was up 0.65 percent while emerging stocks bounced nearly 1 percent to its highest in more than a week.
U.S. stock futures SPc1, DJc1 pointed to a firm start for Wall Street.
U.S. crude oil CLc1 rose 0.2 percent to $99.34 a barrel while the euro was firm at $1.4415, hovering near a two-week high against the dollar and jumping versus the Swiss franc.
The cost of insuring Greek, Irish and Portuguese bonds tumbled as did yields on peripheral debt while safe-haven Bund futures fell.
Ten-year Greek bond yields fell by more than 1 percentage point to 15.64 percent, Portuguese 10-year debt yields were down 49 basis points, and Irish yields fell 45 basis points.
Analysts welcomed the fact the plan foresaw an easing of the terms on the bailout loans to Greece, Ireland and Portugal but had a series of questions over the involvement of bondholders and the amount of liabilities the rescue fund can run up.
"We still have to calculate the contingent liabilities of the EFSF and finally the contingent liabilities of Germany from all these rescue operations. But the markets are happy for the time being," said Kornelius Purps, strategist at Unicredit in Munich.
U.S. DEBT CEILING
The dollar eased against a basket of major currencies, and ceded ground to growth-linked currencies like the Australian dollar .
Efforts to avoid a U.S. default were underway in Washington with President Barack Obama and top lawmakers sought a last-minute deficit-reduction deal before the Aug. 2 deadline to raise the country's debt ceiling.
Congressional aides report that a compromise plan could include up to $3 trillion in spending cuts but might leave tax reform for later.
The main obstacle remains the issue of tax increases that Obama's Democrats demand and Republicans vehemently oppose.
Most investor appear to have been working on the assumption that a deal would be forthcoming to stop a default. The Dow Jones industrial average gained 1.2 percent on Thursday on optimism both about Europe and the U.S. debt debate.