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NEW YORK (Reuters) - World stocks rose to more than 1-1/2 year highs on Wednesday and oil snapped a five-day losing streak as unexpected strength in U.S. consumer spending and earnings at JPMorgan Chase and Intel underscored the economic rebound.
Investors remained cautious about Greece's debt, however, and pushed risk premiums on the nation's bonds higher despite a European Union rescue plan hammered out last weekend.
The U.S. government reported retail sales jumped 1.6 percent in March, the largest increase since November, as consumers stepped up purchases of vehicles and a wide range of goods. The data, which topped analysts' estimate for an increase of 1.2 percent, drove optimism about consumer spending, which drives about two thirds of U.S. economic activity.
"This whole rally is being vindicated by earnings which have been phenomenal, and the comeback of the consumer," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.
Intel's (INTC.O) reported forecast-beating results late on Tuesday that reinforced hopes for an acceleration in the tech sector's recovery. Its shares rose 3.1 percent.
JPMorgan (JPM.N) stock jumped 3.3 percent after it reported earnings that topped estimates.
Indexes of financial shares and technology shares led gains on the broad S&P 500, which broke above the 1,200 mark for the first time since September 2008.
In the U.S., the Dow Jones industrial average .DJI rose62.88 points, or 0.57 percent, to 11,082.30, also the highest since September 2008. The Standard & Poor's 500 Index .SPX increased 8.77 points, or 0.73 percent, to 1,206.07 and the Nasdaq Composite Index .IXIC climbed 28.19 points, or 1.14 percent, to 2,494.18.
In Europe, the pan-European FTSEurofirst 300 .FTEU3 gained 0.6 percent to reach an 18-month closing high at 1,105.32 points.
European banking and tech stocks led the rally, rising on the strength of the U.S. results.
Dutch chip equipment maker ASML (ASML.AS) also reported that its first-quarter orders beat even the most optimistic expectations.
"It looks like nothing is going to stop this market from going higher at the moment, anyway, even any possible Greek debt default," said David Morrison, market strategist at GTF Global in London.
World stocks as measured by MSCI .MIWD00000PUS gained 1 percent to its highest level since the financial crisis was coming to a head in September 2008. Its emerging market counterpart .MSCIEF rose more than 1.2 percent.
Japan's Nikkei .N225 gained 0.39 percent.
Greece's debt problems were again in focus, despite the European Union's rescue plan outlined at the weekend.
The premium investors' demand to buy 10-year Greek government bonds rather than benchmark German Bunds rose to the highest level since the euro zone on Sunday inked an aid deal for Greece. Portuguese bond yields also rose as the EU said Portugal, also heavy with debt, may need fiscal cuts.
The Portuguese 10-year bond yield rose about 0.10 percentage point to 4.46 percent, taking the yield premium over German Bunds to 1.32 percentage points.
The Greek 10-year bond yield drifted up to 7.2 percent from around 6.9 percent on Tuesday, driving the spread over Bunds to 4.05 percentage points.
Greece raised 1.56 billion euros via a 26- and 52-week T-Bill auction, paying a hefty yield. [ID:nLDE63C0FQ]
In other bonds, U.S. Treasury debt prices wavered as tame inflation data for March soothed concerns that rising prices could force interest rates higher, while signs of economic strength in retail sales weighed. Yields on benchmark 10-year Treasury notes rose 0.01 percentage point to 3.83 percent.
The U.S. government said consumer prices rose 0.1 percent in March, matching economists' expectations for a tame reading and giving the Federal Reserve leeway to maintain ultra-low interest rates.
The euro pared gains against the dollar after rating agency Moody's told Reuters there was still a greater than 50 percent chance of a rating cut for debt-stricken Greece in the next 12 to 18 months.
The dollar surrendered gains against the yen and fell against the dollar over disappointment that Federal Reserve Chairman Ben Bernanke in Congressional testimony gave no new guidance on U.S. interest rates.
At midday in New York, the dollar edged lower against a basket of major trading-partner currencies, with the U.S. Dollar Index .DXY off 0.48 percent. The euro rose 0.43 percent to $1.3664, and the dollar declined 0.15 percent to 93.07 yen.
Oil prices rose to trade around $85 a barrel, as a surprise decline in U.S. crude inventories added to optimism about the economy after the U.S. data.
U.S. light sweet crude oil rose $2.02, or 2.4 percent, to $86.07 per barrel.
Spot gold prices rose $8.95, or 0.78 percent, to $1,159.10.
Additional reporting by Jon Hopkins and Jeremy Gaunt in London; Editing by Leslie Adler