* MSCI world equity index up 0.2 percent at 221.30
* Expectation of higher Wall Street open boost Europe
* Oil lower; government bonds reverse early gains
By Natsuko Waki
LONDON, Dec 9 (Reuters) - World shares ticked higher on Tuesday, encouraged by higher U.S. stock futures which indicated Wall Street could add to the previous day's strong gains, and an unexpected rise in a German economic sentiment index.
A day after U.S. stock rallied to their highest level in a month, the focus was also on U.S. automakers as the White House and congressional Democrats are expected to finalise a $15 billion proposal to bail them out.
The closely-watched ZEW index, which measures analyst and investor sentiment on the outlook for Europe's biggest economy, rose to -45.2 in December from -53.5 in November. This contrasted with data showing British industrial output fell at its sharpest pace in nearly six years in October.
"Markets have come down a long way, so expectations are very low," said Grahame Exton, investment director at Tilney fund man agement.
"The data reinforces a view that there will be more reflationary measures and more rate cuts, so people are looking through the bad news as a forerunner to more good news." MSCI world equity index rose 0.2 percent while the FTSEurofirst 300 index gained 1.6 percent, having been down as much as 1.4 percent earlier in the day. Emerging stocks fell 0.1 percent.
U.S. stock futures were up 0.7 percent.
Stocks got a fillip on Monday after U.S. President-elect Barack Obama outlined plans at the weekend for the largest infrastructure investment since the 1950s.
Monday's rally pushed the S&P index into positive territory for the month.
U.S. crude oil fell 0.6 percent to $43.47 a barrel after rallying 7 percent the previous day.
December Bund futures fell 68 ticks. The yield on 10-year U.S. Treasuries stood at 2.7548 percent, having hit a five-decade low of 2.510 percent last week.
"Bond yields could drop in the near future if central banks cut short-term interest rates and the growth outlook worsens," Henderson Global Investors said in a note to clients.
"Except in the worst scenarios, bonds are not good value on a medium-term perspective and yields could be rising by the second half of next year."
The dollar rose 0.7 percent against a basket of major currencies while the yen was steady at 92.80 per dollar.
Data showed Japan's economy contracted at an even faster pace than originally estimated during the third quarter, with the economy shrinking 0.5 percent in July-September. (Additional reporting by Simon Falush, editing by Mike Peacock)