* U.S. data bolsters most equities, euro
* Fitch downgrades New Zealand's debt rating
* Bill to beef up euro-zone rescue fund passes in Germany (Updates prices, adds New Zealand downgrade, changes comment)
By Rodrigo Campos
NEW YORK, Sept 29 (Reuters) - Upbeat economic news from the United States and a stronger euro-zone bailout fund lifted investor sentiment on Thursday, supporting most stock indexes and the euro.
U.S. weekly jobless benefits claims fell to a five-month low while revised data showed second-quarter GDP grew slightly more than expected. For details, see [ID:nS1E78S0BT]
Germany's parliament also overwhelmingly approved the plan agreed in July to expand the euro zone's bailout fund. [ID:nL5E7KT2WC]
"The vote in Germany is obviously positive news and is exactly what is needed to give the region the go-ahead to recapitalize their banks," said Deirdre Dennehy, portfolio manager at the Rockland, Massachusetts-based Rockland Trust.
"Liquidity is the main problem there, and this will provide for more liquidity."
In afternoon trading, the Dow Jones industrial average <.DJI> was up 86.24 points, or 0.78 percent, at 11,097.14. The Standard & Poor's 500 Index <.SPX> was up 2.74 points, or 0.24 percent, at 1,153.80. But the Nasdaq Composite Index <.IXIC> was down 26.21 points, or 1.05 percent, at 2,465.37.
Declines in some big-cap Internet names hurt the Nasdaq.
Earlier, the Dow and the S&P 500 each rose as much as 2 percent.
An index of global equities <.MIWD00000PUS> rose 0.05
percent, European shares <.FTEU3> ended up 0.64 percent and
U.S. dollar-denominated Nikkei futures
U.S. crude futures
Volatility is likely to remain high as markets react to European headlines and try to gauge the commitment of governments and institutions as they work to prevent a Greek debt default that could translate into a global economic slowdown.
A rebalancing of portfolio holdings as the third quarter draws to a close could also keep markets volatile.
From relief after the lawmakers' vote in Berlin, the market's European focus shifted to talks between the European Union, the IMF and Greece. Auditors will see if Athens has done enough to receive the next tranche of aid.
The failure to find a definitive solution to the crisis has led to worries about contagion engulfing bigger euro-zone economies like Italy and Spain and triggered concerns about the health of the European banking system.
Italy paid the highest yield on a 10-year bond since the introduction of the euro at an auction on Thursday, the first long-term sale since Standard & Poor's cut the country's sovereign ratings.
The euro
"There's been a little bit of a relief rally, given that there was such strong support for the measure in Germany," said Joe Manimbo, senior market analyst at Travelex Global Payments in Washington. "But being month end, the euro might be a sell up here at these higher levels."
Despite the latest bounce, the euro has lost more than 5 percent against the dollar this month, hammered by mounting worries over the prospect of a Greek default and bickering among policy-makers.
The New Zealand dollar fell to a session low against the U.S. dollar after ratings agency Fitch cut New Zealand's credit rating by one notch to AA, citing the country's inability to reduce its current account deficit in the next few years.
The kiwi pared losses against the greenback and was last down 0.27 percent at $0.7714. (Reporting by Rodrigo Campos; Additional reporting by Wanfeng Zhou and Ryan Vlastelica; Editing by Jan Paschal)