CORRECTED - GLOBAL MARKETS-U.S. stocks up, euro falls on debt jitters

(Corrects headline to show U.S. stocks up, not flat)

* Nagging debt worries hurt euro, Finnish vote pares loss

* Wall Street rebounds; European shares up on bank sector

* Bonds firm, gold at 3-week high on safe-haven demand

* U.S. oil prices rise, erase early losses (Updates market action, adds fresh quote)

By Richard Leong

NEW YORK, May 25 (Reuters) - The euro edged lower on nagging worries about the euro zone's spreading debt crisis while oil prices rose on Wednesday after weekly inventory data spurred supply concerns.

Wall Street stocks rose, led higher by shares closely linked to the rallying commodities market. Caterpillar , a top supplier of mining equipment, was up 1.2 percent and gave the Dow industrials index its biggest boost.

"This is an oversold bounce, led by commodities and a retreat in the dollar index," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

U.S. crude futures rose after data showed a big drop in inventories of diesel fuel, heating oil and other distillates.

Europe's policy options to avert a Greek debt default appeared to be dwindling quickly, fueling fears of a chain reaction affecting other heavily indebted countries in the 17-nation currency bloc.

Finland approved a bailout for debt-laden Portugal. The Finnish parliament, unlike others in the region, has the right to vote on EU requests for bailout funds. For more, see: [ID:nHEL010189]

European shares rebounded and the euro pared losses on that vote, but nagging worries capped further advances.

"Europe is a lingering problem. I don't think that (debt) problem will go away any time soon," said Sharon Stark, chief fixed income strategist at Sterne Agee & Leach in Birmingham, Alabama.

The euro last traded at $1.4075 after bouncing up to $1.4092 after the Finnish news. The single currency was 0.2 percent lower on the day and hit a record low against the Swiss franc.

The Dow Jones industrial average <.DJI> gained 36.90 points, or 0.30 percent, to 12,393.11. The Standard & Poor's 500 Index <.SPX> added 4.40 points, or 0.33 percent, to 1,320.68. The Nasdaq Composite Index <.IXIC> rose 13.85 points, or 0.50 percent, to 2,760.01.

European shares rose as investors bought beaten-down banking stocks, bucking losses in Asia.

World stocks as measured by MSCI <.MIWD00000PUS> were up 0.1 percent while the pan-European FTSEurofirst index <.FTEU3> of top shares rose 0.7 percent, with anxiety about the potential for further Greek contagion limiting gains. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters poll on U.S. govt bond yields [ID:nLDE74N1L4] Euro seen down to $1.30 if Greece restructures [ID:nLDE74N0U1] Euro zone debt struggle http://r.reuters.com/hyb65p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

A Greek debt default would hurt other troubled euro zone economies and could push Portuguese and Irish debt into junk rated territory, Moody's said on Tuesday. It warned that it would classify most forms of restructuring as a default. [ID:nLDE74N0AQ]

U.S. Treasuries and German Bunds were mostly steady, benefiting from safe-haven flows.

The 10-year Bund yield was just above the significant 3.0 percent level and could soon breach it given the unresolved debt crisis.

Its U.S. counterpart was was steady on the day at 3.12 percent. It was within striking distance of its 200-day moving average of 3.09 percent, which if breached would signal a further rally for U.S. bonds.

In the oil market, U.S. crude was up 19 cents a barrel at $99.78 a barrel, while Brent crude for July was up 1 percent at $113.67.

Gold steadied after having rallied to its highest level in three weeks in the previous session. But bullion priced in euros struck a record high on concerns about the impact of a possible debt default by Greece on other euro zone economies.

Spot gold was last bid at $1,525.75 an ounce, up from $1,525.75 an ounce in late New York on Tuesday, when the precious metal hit a three-week high of $1,527.45. (Additional reporting by Angela Moon in New York; Emelia Sithole-Matarise, Anirban Nag, Jessica Donati and Joanne Frearson in London; Editing by Dan Grebler)