* Stocks, euro rebound after Monday sell-off on debt fears
* Gold hovers near $1,600/oz after touching record high
* U.S. benchmark government yields stuck below 3.0 pct
* Risk aversion remains high on euro zone, US debt debate
(Recasts lead, updates market action, adds byline)
By Richard Leong
NEW YORK, July 19 (Reuters) - Wall Street stocks and the euro rose on Tuesday, as upbeat U.S. corporate earnings countered worries over debt crises in Europe and United States.
A surprise jump in U.S. housing starts June also reduced concern that the U.S. economy may be slipping into a recession.
"So far earnings have been showing us a better picture of the economy than some macroeconomic issues suggest, which is encouraging, especially with housing starts surprising to the upside," said Michelle Gibley, senior market analyst at Schwab Center for Financial Research in Denver.
Gold continued to attract safe-haven investment flows,
although it retreated below $1,600 an ounce after touching an
all-time high near $1,610
Italian and Spanish bonds, which were pummeled by fears that a possible Greek default could damage the third and fourth largest economies in the euro zone, firmed slightly after 10-year yields jumped to six percent on Monday.
Investors were focusing on a euro zone summit to be held in Brussels on Thursday, hoping it will complete a second bailout for Greece in an attempt to contain the sovereign debt crisis.
"There is some lightening of short positions ahead of (the summit) on the risk there could be some sort of agreement reached," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"But an agreement on Thursday could include some form of Greek default, which to me is not necessarily a positive outcome for the euro."
The euro
Still, risk aversion among investors remained high also because of the looming Aug. 2 deadline when the U.S. government will run out of funding options, pushing the world's biggest economy into default and endangering its top-notch credit rating.
Political leaders in Washington are still at an impasse over raising the government's $14.3 trillion statutory debt limit. [ID:nN1E76H1Y0]
Investors for the most part appear to be assuming that the U.S. debt ceiling will be lifted and a default averted, with the 10-year Treasury yield hovering near 3.0 percent.
Despite jitters over the debt problems on both sides of the Atlantic, some upbeat U.S. corporate earnings results and better-than-expected data on housing starts kindled some appetite for stocks and other risky assets.
The Dow Jones industrial average <.DJI> was up 124.31 points, or 1.00 percent, at 12,509.47. The Standard & Poor's 500 Index <.SPX> was up 13.34 points, or 1.02 percent, at 1,318.78. The Nasdaq Composite Index <.IXIC> was up 47.12 points, or 1.70 percent, at 2,812.23.
European shares also rose, helped along by technology
shares that got a boost from an upbeat statement from IBM
World stocks as measured by MSCI <.MIWD00000PUS> were up 1.1 percent after losing 1.2 percent on Monday.
In the precious metals market, spot gold
(Writing by Richard Leong in New York; additional reporting by Julie Haviv and Ryan Vlastelica in New York; Kirsten Donovan, Emelia Sithole-Matarise and Jan Harvey in London)