* Spain 2013 budget focuses on spending cuts vs tax hikes
* U.S. economic data mixed
* Brent crude oil above $110 on Iran tensions
NEW YORK, Sept 27 (Reuters) - Stocks rose and the euro recovered from two-week lows on Thursday after the Spanish government said it would cut spending sharply and opened the door for a potential European bailout.
Spain’s Deputy Prime Minister Soraya Saenz de Santamaria announced a timetable for economic reforms and a tough 2013 budget focused on spending cuts rather than tax increases as the country continues to negotiate a possible European aid package to ease high borrowing costs.
Officials said Spain was still analyzing the terms of the potential European Central Bank bond-buying program announced earlier this month and added that a decision on an aid request will be taken when the effect of the spending cuts is fully known.
“If there’s a solution where (Spain) can lower their yields, then there’s a possibility Spain will find a way to pull themselves out of this mess. Stocks are popping on this, and so is gold,” said Mike Matousek, senior trader at U.S. Global Investors in San Antonio.
The euro, which has lost more than 1.6 percent over the last two weeks, rose to $1.2912, up 0.3 percent, after hitting a low of $1.2830 earlier in the day.
Talk on Thursday that the China Securities Regulatory Commission would announce steps to support beleaguered domestic markets was also positive for relatively risky investments. .
The MSCI world equity index was up 0.9 percent at 333.68. European stocks rose 0.4 percent.
The Dow Jones industrial average rose 72.46 points, or 0.54 percent, to 13,485.97. The Standard & Poor’s 500 Index was up 13.83 points, or 0.96 percent, at 1,447.15, snapping a five day decline. The Nasdaq Composite Index was up 42.90 points, or 1.39 percent, at 3,136.60.
Gold rose 1.5 percent, its biggest daily gain in two weeks, on hopes for additional monetary stimulus from China and fresh austerity steps in Spain. Spot gold rose to $1,776.34 per ounce.
Euro zone worries have come back into investor focus over the last week as the stock market rally on stimulus announced earlier this month by the Federal Reserve and ECB gave way to doubts about whether Spain would submit to a politically painful rescue program.
Conscious that seeking help from EU partners would carry conditions for budget savings that would be unpopular at home, Spanish Prime Minister Mariano Rajoy had said he is not sure if a bailout is needed.
Economy Minister Luis de Guindos said on Thursday Spain’s measures and reform were fully coordinated with the European Union framework and its recommendations on budget control.
“This is laying the ground for when the trigger will be pulled at some stage, but it’s nothing like they can avoid the trigger,” said David Schnautz, rate strategist at Commerzbank in New York.
Protests in Spain and Greece against austerity measures roiled markets on Wednesday, sending 10-year Spanish bond yields back above the 6 percent threshold.
Spanish yields were slightly lower on Thursday at 5.959 percent, while the German 10-year Bund was flat at 1.469 percent.
A report showed U.S. durable goods orders fell more than expected in August and another estimated second-quarter gross domestic product growth came in below expectations. But a fall in initial jobless claims in the latest week was taken as encouraging..
Separately, the Labor Department said the U.S. economy likely created 386,000 more jobs in the 12 months through March than previously estimated, in a preliminary estimate of its annual “benchmark” revision to closely watched payrolls data.
“You put it all together, a lot of this is backward-looking data, some of this is more forward-looking,” said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York. “It’s certainly a negative but not a disaster at all.”
The benchmark 10-year U.S. Treasury note was down 10/32, the yield at 1.6421 percent.
Oil prices rose as renewed worries over supply disruptions from the Middle East due to anti-Israeli and anti-Western comments from Iran helped keep Brent futures above $110 a barrel. Brent crude was up 2.1 percent at $112.31. U.S. crude rose 2.4 percent to $92.11.