* Shares gain in U.S., Europe; S&P erases losses for the
week
* Signs Spain moving toward rescue request ease markets'
uncertainty
* Euro rises modestly while dollar index struggles
* Oil tops $111 on Libya, other supply worries
NEW YORK, Sept 21 (Reuters) - Stocks and the euro rebounded
o n F riday, with sentiment over Europe improving as Spain worked
on reforms and was expected to seek a bailout package soon that
could resolve its debt problems.
Spain is considering freezing pensions and speeding up a
planned rise in the retirement age as it races to cut spending
and meet conditions of an expected international sovereign aid
package, sources with knowledge of the matter said.
However, the Spanish deputy prime minister later denied the
Reuters report.
Oil prices, meanwhile, rose on supply worries arising from
the geopolitical situation in Libya and lower North Sea
production. Brent climbed 1 percent above $111 a barrel.
Concerns over the euro zone's debt crisis have kept markets
in check this past week, with investors worrying that Spain
might not seek a bailout package. That would call into question
the country's ability to deal with its debt.
"The problems are very big (in Spain and Europe in general),
it's possible this is the beginning of the workout of the
situation. It certainly takes some pressure off," said Rick
Meckler, president LibertyView Capital Management in New York.
The report of Spanish reform boosted sentiment. U.S. stocks
rose 0.2 percent, while European shares closed up 0.4
percent and the MSCI global index climbed 0.5
percent. The expiration of options contracts could spur some
volatility later in the U.S. session.
U.S. equities were also boosted by Apple Inc, the
most valuable U.S. company, which debuted the latest version of
its iPhone worldwide. Its shares rose 0.8 percent to $704.54.
With Friday's gains, the S&P is flat for the week, but year
to date the benchmark index has risen 16 percent, boosted by
concerted central bank economic stimulus measures. Investors
have been looking for reasons to keep pushing equities higher
after steep gains since June.
The Dow Jones industrial average was up 29.66 points,
or 0.22 percent, at 13,626.59. The Standard & Poor's 500 Index
was up 3.65 points, or 0.25 percent, at 1,463.91. The
Nasdaq Composite Index was up 13.65 points, or 0.43
percent, at 3,189.61.
The euro, which has lost around 1.5 percent since
hitting a 4-1/2 month high a week ago, was up 0.15 percent at
$1.2988, having briefly climbed back above the psychologically
important $1.30 mark.
The dollar fell 0.1 percent against a basket of currencies,
with the its index at 79.348, bringing it closer to a
six-and-a-half month low of 78.601 hit last week in the wake of
aggressive monetary easing by the U.S. Federal Reserve.
With all eyes on whether Spain will call for aid, support
for the euro was seen at Thursday's low, which stood just above
its 233-day moving average at $1.2915.
Markets brushed off a well-flagged report from the UK
showing its plans to reduce its deficit have fallen behind
target as the European debt crisis has hit global growth.
It followed Italy's warning late on Wednesday that its
recession will be far more severe than forecast, making it
harder to reduce the country's debt burden.
UNACCEPTABLE YIELDS
Underlining fears about faltering global growth, the World
Trade Organization cut its global trade forecast to 2.5 percent
from 3.7 percent on Friday.
In bond markets, the benchmark 10-year U.S. Treasury note
was down 2/32 in price, the yield at 1.7702 percent
as talk Spain might soon request a bailout was said to favor
riskier assets.
Spain and Italy's 10-year bond yields
were slightly higher, although demand for German
government bonds also eased, with December Bund futures
15 ticks lower at 140.15.
The ECB's new plan, which requires struggling countries to
submit to fiscal rehabilitation programs in order to qualify for
bond-buying support in the open market, has been one of the key
factors in the sharp drop in Italian and Spanish borrowing costs
and the 15-20 percent surge in major stock markets.
Gold prices hovered at a 6-1/2 month high, rising 0.2
percent to $1,770.76 an ounce, supported by the ongoing lift
from the recent aggressive moves from the Fed, ECB and the bank
of Japan.