GLOBAL MARKETS-Global stocks, euro rise on Europe debt hopes

* Europe bond proposal lifts risk appetite across markets

* Stocks, euro gain on hopes debt crisis to be resolved

* U.S. debt prices falter as safe-haven appeal eases

* Many investors still see Greek default despite EU effort (Updates prices)

By Herbert Lash

NEW YORK, Sept 14 (Reuters) - Global equities rallied and the euro rose on Wednesday as optimism over tentative steps to resolve Europe's debt crisis overcame still widespread fears that Greece will ultimately default on its debt.

Stocks on Wall Street jumped more than 2 percent after Europe's top bureaucrat said plans for a common euro zone bond, seen by many as a key tool to ease the region's festering debt crisis, would soon be presented. For details, see [ID:nL3E7KE09F]

Equity markets on both sides of the Atlantic jumped and the euro rose. Creation of such a bond would give the weaker countries in the euro zone access to cheaper funds, although Germany has consistently opposed such a move. [ID:nLDE78D03R]

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed up 1.4 percent at 913.22, while MSCI's all-country world index <.MIWD00000PUS> rose 0.9 percent.

"The focus today seems to be on whether or not Greece defaults, and the market is anticipating that the can will again be kicked down the road, avoiding a default," said Clark Yingst, chief market analyst at Joseph Gunnar & Co in New York.

"Still, the market is fluctuating intraday on the uncertainty related to the issue," Yingst said.

The president of the European Commission, Jose Manuel Barroso, acknowledged as much, saying Europe was facing its most serious challenge in a generation, but there was no simple solution.

Stocks and the euro extended gains after France and Germany said Greece's future remains in the euro zone, tapping down fears of a departure that could spark a systemic rupture. [ID:nP6E7JV05EID:nP6E7JV05E]

The Dow Jones industrial average <.DJI> was up 228.67 points, or 2.06 percent, at 11,334.52. The Standard & Poor's 500 Index <.SPX> was up 24.08 points, or 2.05 percent, at 1,196.95. The Nasdaq Composite Index <.IXIC> was up 58.05 points, or 2.29 percent, at 2,590.20.

The euro's initial tepid gains suggested a clear outcome to the European debt crisis was still not in hand. The currency rose 0.5 percent against the dollar to $1.3726 .

DEBT ISSUE STILL A CONCERN

The market's path of least resistance is still lower until Europe pulls a rabbit from the hat and resolves the debt issue, said Troy Buckner, managing principle at hedge fund NuWave Investment Management in Parsippany, New Jersey.

While equities have posted modest gains in recent days, key commodity markets have failed to participate, he said.

"For the moment at least, our strategies are pointing to 'risk off' in both commodity and stock markets," Buckner said.

Copper fell to within 2 percent of its 2011 low, and gold fell as volatile prices hurt the precious metal's safe-haven appeal.

Benchmark copper on the London Metal Exchange closed down $145 to $8,635 a tonne, while spot gold prices fell $16.51 $1,816.70 an ounce.

Brent crude rose as investors hoped Europe was closer to easing the region's debt crisis, while data showing an increase in U.S. product inventories dragged down U.S. futures.

Brent crude for October delivery settled up 51 cents at $112.40 a barrel, while U.S. October crude settled down $1.30 to $88.91.

The benchmark 10-year U.S. Treasury note was down 5/32 in price to yield 2.0 percent. (Reporting by Ryan Vlastelica, Emily Flitter, Gene Ramos and Robert Gibbons in New York; Simon Jessop in London; Writing by Herbert Lash; Editing by Leslie Adler)