GLOBAL MARKETS-European shares open new year higher, euro falls

* European shares rise 1.2 pct; oil prices higher

* Euro falls on debt worries ahead of auctions

By Nigel Stephenson

LONDON, Jan 3 (Reuters) - European shares rose on Monday in the first trading session of 2011, led by German automaker Porsche, while the euro fell against the dollar on concerns the euro zone sovereign debt crisis could resurface soon.

German government bond futures rose but pared earlier gains as stocks bounced and after stronger-than-expected euro zone manufacturing data.

Gold prices held steady while oil extended its rally above $92 a barrel on optimism the global economic recovery was gaining momentum. U.S. Treasuries prices fell sharply, anticipating stronger U.S. data would support rising yields.

U.S. stock index futures pointed to a higher open on Wall Street.

"Sentiment is positive and that is mainly because of the seasonality. Money managers typically get some new inflows at the start of a year and they put them to work," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

With markets in Britain and parts of Asia closed, trade was very thin.

The FTSEurofirst 300 index <.FTEU3> of top European stocks was 1.17 percent higher at 1,134.84. Porsche rose nearly 15 percent after a U.S. judge dismissed a lawsuit by hedge funds seeking more than $2 billion in damages.

Analysts said equity markets were expected to remain volatile in 2011 as issues including the euro zone debt crisis resurfaced.

"A lot of the positive news has been priced into equities and the first half is going to be a bumpy ride for the equity market," a Germany-based equity strategist said.

The euro dipped against the dollar, with traders and analysts warning that the euro zone debt crisis, and the year's first sovereign debt auctions in the bloc, could weigh on the single currency.

"Bond market spreads could be a bit of a burden for the euro," said Lutz Karpowitz, senior currency strategist at Commerzbank in Frankfurt.

He added, however, that data from the U.S. Institute for Supply Management, due later on Monday, could support the dollar. The ISM's December non-manufacturing data index is forecast to rise to 56.9 from 56.6 in November.

The euro was last at $1.3315, down 0.4 percent, but off its lows after higher European shares boosted sentiment. The dollar index <.DXY>, which measures the greenback against a basket of currencies, was up 0.4 percent.

DEBT AUCTIONS

Germany and France are scheduled to sell bonds this week and indebted Portugal sells treasury bills. [D/DIARY]

"There's the question of whether things are going to blow up again with everyone having so much issuance to do and that will lead to more stresses on the periphery," a debt trader said, referring to the euro zone's weaker economies.

German Bund futures were up, though well off earlier highs after the rise in stock prices and after the Markit Eurozone Manufacturing Purchasing Managers' Index was revised higher to 57.1 from an earlier 56.8. [ID:nSLAVNE6L8]

Bund futures were just eight ticks higher at 125.39, off a high of 125.93 while German 10-year bonds yielded 2.96 percent, up 1 basis point.

U.S. Treasuries futures were down 24/32 at 119-22/32.

Gold was steady at $1,420.15 an ounce, still close to a three-week high of $1,421.15 hit on Dec. 31. Silver rose to a 30-year peak above $31.

U.S. crude traded 77 cents higher at $92.15 a barrel, just off a session high of $92.20, its highest since October 2008.

(Reporting by London Markets team; Editing by Ruth Pitchford)