LONDON (Reuters) - Stocks and the euro rose on Monday on relief over sweeping austerity measures passed by the Greek parliament, but gains looked fragile with several issues still to be resolved before the shadow of a messy debt default is lifted.
U.S. stock index futures pointed to a recovery for equities on Wall Street after delays in agreeing a new Greek bailout deal sent the S&P 500 index to its biggest daily loss of the year on Friday. .N
"People were losing patience with Greece. In the end they got their act together and it's definitely a positive," Markus Huber, head of German sales trading at ETX Capital, said.
Before Greece can secure a second rescue and get the $14.5 billion euros it needs to meet debt repayments due on March 20, the Greek government must convince a skeptical euro zone that it would stick to the terms of the deal.
The focus is now on a euro zone finance ministers meeting on Wednesday that is due to decide on approval of the next 130-billion euro aid package.
The FTSEurofirst 300 .FTEU3 index of top shares, which fell 0.9 percent to a one-week low on Friday, was up 0.8 percent at 1072.82 points, led by banks with the main European banking shares index .SX7P gaining 1.3 percent.
The broad MSCI All Country World Index .MIWD00000PUS was up 0.6 percent at 325.80 and heading back towards six-month highs, also driven by signs of an improving global economic outlook.
The euro was up 0.6 percent to $1.3255, recouping some of the losses made on Friday and looking set to test a two-month high of $1.3322 hit last week.
Euro zone debt crisis in graphics: r.reuters.com/hyb65p
Euro zone sovereign debt supply outlook 2012: r.reuters.com/gev45s
In debt markets the recovery in risk appetite meant Italian and Spanish bond yields fell but debt investors were also eyeing 25 billion euros of new euro zone supply this week, with Spain, France and Italy all looking to sell bonds. <EUR/DIARY>
Italian 10-year yields fell 11 basis points to 5.53 percent, taking their decline so far this year to more than 1.5 percentage points and closing in on equivalent Spanish yields which were last at 5.26 percent.
Elsewhere, news that Japan's economy shrank a lot more than expected in the fourth quarter, falling 0.6 percent compared with the previous three months, increased speculation over policy easing there.
The Bank of Japan began a two-day meeting on Monday, though its key policy rate is already close to zero, and it has already created 55 trillion yen ($708 billion) through an asset buying and lending program, leaving it with limited firepower.
The yen, which eased briefly on the speculation of more stimulus by the central bank, was marginally higher against the dollar at 77.60 yen, just below a two-week high of 77.81 yen hit on Friday.
With the euro and yen enjoying gains, the dollar trade-weighed index was about 0.5 percent .DXY lower, giving a lift to commodities and oil.
Front-month Brent crude was up $1 to $118.14 after gaining 2.6 percent last week, its third straight weekly rise. U.S. crude was up $1.02 at $99.69 a barrel.
A weaker U.S. currency can lift dollar-denominated oil by making the commodity cheaper for consumers using other currencies.
Gold, which has been tracking shares and the euro in recent months, was little changed as investors used the approval of the austerity bill by the Greek parliament to cash in some gains.
Gold has risen over 10 percent this year and is trading at around $1,731 an ounce.
($1 = 0.7582 euros; $1 = 77.6400 Japanese yen)
Additional reporting by Anirban Nag. Editing by Jeremy Gaunt/Toby Chopra/John Stonestreet