CANADA FX DEBT-C$ stronger as Europe fears ease, stocks rise

   * C$ ends at C$0.9840 vs US$, or $1.0163

 * U.S. dollar seen gaining momentum as Europe weighs

 * Bond prices slip across the curve

 TORONTO, Sept 15 (Reuters) - The Canadian dollar ended
stronger against the U.S. dollar on Thursday as investors
returned to equities, oil and other risk assets, encouraged by
signs policymakers are addressing the European debt crisis.

 Global stocks advanced for a third straight day and the
euro gained sharply after the world's leading central banks
moved to make funding easier for European banks facing
difficulties raising U.S. dollars. [MKTS/GLOB]

 In another step to alleviate Europe's debt crisis, U.S.
Treasury Secretary Timothy Geithner will discuss with European
finance ministers the possibility of leveraging the euro zone's
bailout fund to make it more effective, sources said.
[ID:nL5E7KF1CX].

 The moves sent European shares more than 2 percent higher.
North American stocks followed suit, with stock indexes on Wall
Street and in Toronto closing up more than 1 percent.

 Canada's currency, which typically follows the direction of
U.S. equities, strengthened against the U.S. dollar as
investors returned to riskier assets, but analysts said the
move could be short-lived.

 "Markets are adding a little bit of risk," said John
Curran, senior vice president at CanadianForex, a commercial
foreign exchange dealing firm.

 "But it still amazes me that people think that the European
situation is a short-term thing and might be fixed.
Realistically, I think the U.S. dollar is gaining momentum
going into risk-aversion mode, where people should be leery
about what's going on globally."

 The Canadian dollar CAD=D4 ended the North American
session at C$0.9840 to the U.S. dollar, or $1.0163 U.S. cents,
up from Wednesday's North American session close of C$0.9908 to
the U.S. dollar, or $1.0093 U.S. cents.

 In a sign of difficulties ahead, German Chancellor Angela
Merkel bluntly rejected euro zone bonds as a solution to
Europe's sovereign debt crisis. [ID:nL5E7KF1CX]

 The news from Europe drowned out a fresh spate of
disappointing U.S. data that showed new claims for jobless
benefits rose unexpectedly last week and factory activity in
the mid-Atlantic region contracted early this month. The data
backed the view that the U.S. Federal Reserve would move soon
to boost economic growth. [ID:nS1E78E0U8]

 Separate data showed Canadian factory sales rose twice as
much as expected in July, making a recession look less likely
as the economy shows signs of picking up in the third quarter
after an unexpected slump in the second. [ID:nS1E78E05E]

 Canadian bond prices slipped across the curve.

 The two-year bond CA2YT=RR was down 17.1 Canadian cents
to yield 1.022 percent, while the 10-year bond CA10YT=RR lost
86 Canadian cents to yield 2.296 percent.
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)