* MSCI world equity index up 0.26 percent
* Euro up after Spain sells 3.5 bln eur of long-dated bonds
* Oil, dollar fall
By Natsuko Waki
LONDON, June 17 (Reuters) - World stocks hit a one-month high on Thursday and the euro rose broadly after Spanish bond issues drew strong demand, easing concerns over the country's public finances.
Spain sold 3.5 billion euros of 10- and 30-year government bonds, at the top of its target range, though yields were high. The well covered auction helped narrow the spread of Spanish yields over benchmark Bunds from an earlier euro lifetime high.
France also sold just shy of 8 billion euros of short-dated bonds.
The relatively successful bond sales eased concerns over the ability of peripheral euro zone countries, especially Spain, to finance their huge debt amid investor nervousness that some of the region's banks may be facing a liquidity freeze.
"The strong demand for Spanish bonds should help restore confidence," said Ciaran O'Hagan, strategist at Societe Generale. The MSCI world equity index erased earlier losses to stand up 0.26 percent, hitting a one-month high.
The FTSEurofirst 300 index rose 0.6 percent.
Oil major BP surged more than 7 percent after saying it will set up a $20 billion fund for damages claims from its huge Gulf of Mexico oil spill, sell assets and suspend dividend payments to shareholders.
European bank shares also rose broadly.
UK finance minister George Osborne announced the biggest shake-up of the regulatory landscape in 13 years on Wednesday, saying he was to give the Bank of England ultimate control over financial supervision.
"We have seen some resolution from the European politicians. Even though the problems are not going away they are conveying the impression that they are going to do something about it," said David Buik, senior partner at BGC partners.
"When the markets have been out of confidence that is what they want to see."
Emerging stocks were up 0.6 percent.
The euro rose 0.6 percent to $1.2375 while the dollar erased gains to stand down 0.4 percent.
European Union leaders began talks on Thursday on ways to strengthen budget discipline and economic policy coordination, hoping to show financial markets they can see off a euro zone debt crisis.
Spain's economy minister Elena Salgado said the country will publish detailed results of bank stress test and may use as much as 30 billion euros of its Fund for Orderly Bank Restructuring (FROB) to cover its lenders' financing needs.
Bund futures fell 19 ticks as improving sentiment for peripheral bond cut demand for safe-haven German bonds.
U.S. crude oil fell 0.4 percent to $77.34 a barrel.
(editing by John Stonestreet)