* Global equities rise on hopes European leaders to act
* Euro gains against U.S dollar as risk sentiment improves
* US debt prices fall, German bonds rise as crisis festers
* Brent crude prices pare gains on weak demand forecast (Adds fresh prices)
By Herbert Lash
NEW YORK, Sept 13 (Reuters) - Global stocks and the euro edged higher on Tuesday on hopes Europe's top powers will supply fresh support for Greece, though uncertainty coursed through markets as the Greek debt crisis remained unresolved.
German Chancellor Angela Merkel sought to quash talk of an imminent Greek default but market confidence suffered another blow when Italy had to pay the highest yield since it joined the euro zone in 1999 to sell five-year bonds. For details see:[ID:nL5E7KD1TR]
A Reuters report quoting a Greek government official as saying that Greek, German and French leaders would hold a conference call on Wednesday helped buoy the euro and underpin optimism in European equity markets. Two German government sources confirmed the plans. [ID:nL5E7KD29C][ID:nB4E7K9007]
"The market is still very much focused on the euro. We are back to watching headlines and it seems like there are more rumors than fact," said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.
"In general, it's still a very cautious backdrop and it's hard to see a sustained back-up in the euro and even for that matter a sustained back-up in the European stock markets," he added.
The euro
European stocks rallied from two-year lows to end higher, although the sharp rise in Italy's borrowing costs and simmering fears of a Greek default kept gains in check. [ID:nP6E7KC093]
The FTSEurofirst 300 <.FTEU3> index of top European shares closed up 1.06 percent at 900.43 points.
Banking stocks bounced back in what was mostly seen as a
technical rally, with Societe Generale
"The question is not 'if' indexes will revisit March 2009 lows, but 'when,'" said Vincent Ganne, technical analyst at TradingSat. "Is it going to happen in the next two weeks or in December? Hard to say."
MSCI's all-country world equity index rose 0.4 percent.
The Nasdaq and Standard & Poor's 500 Index rose, while the Dow Jones industrial average fell slightly.
Brian Battle, a trader at Performance Trust Capital Partners in Chicago, said stocks were being pulled by those who see them as overvauled given the economy is on the cusp of recession, and those who say stocks are historically cheap.
"We're going to wrestle around and remain range-bound until we figure out which theory is true," Battle said.
The Dow Jones industrial average <.DJI> was down 20.74 points, or 0.19 percent, at 11,040.38. The Standard & Poor's 500 Index <.SPX> was up 2.41 points, or 0.21 percent, at 1,164.68. The Nasdaq Composite Index <.IXIC> was up 14.53 points, or 0.58 percent, at 2,509.62.
Consumer staple shares were the biggest decliners, weighed
by Best Buy Co Inc
Oracle Corp
U.S. Treasury prices fell ahead of a 10-year note auction
while yields on benchmark German Bund
The benchmark 10-year U.S. Treasury note
Talk that Merkel and French President Nicolas Sarkozy would make a statement on Greece later in the day buoyed market sentiment but Sarkozy's office denied the speculation.
Brent crude prices pared early gains and fell below $112 a barrel after the International Energy Agency cut its estimate for demand growth and raised its supply forecast. The IEA said Libyan crude oil production capacity would come back sooner than expected and there were signs that OPEC output was continuing to grow.
Brent
Gold prices rose in volatile trade after briefly extending the previous session's 2.5 percent slide below $1,800 an ounce.
Spot gold prices