GLOBAL MARKETS-World stocks up as Dubai fears ease; dollar down

* World stocks up as risk aversion eases

* U.S. dollar, Treasuries unwind gains as fears soothed

* U.S. stocks fall as consumers spend less vs year ago

(Updates with U.S. prices, adds byline, dateline, previous: LONDON)

By Manuela Badawy

NEW YORK, Nov 30 (Reuters) - World stocks rose on Monday as shock waves from Dubai's debt delay proposal died down.

The U.S. dollar fell against the euro after United Arab Emirates promised liquidity, easing worries about a default.

Dubai's proposed delay last week in repaying billions of dollars of debts of its state-owned conglomerate Dubai World and property subsidiary Nakheel roiled global markets, raising fears that the emirate which funded a spectacular building boom on a mountain of debt could default. [ID:nSP362937]

For a graph on the Emirates' debt please click on: http://graphics.thomsonreuters.com/119/ME_DBTSK1109.gif

The MSCI world stock index <.MIWD00000PUS> was up 0.15 percent, gaining 28.6 percent so far this year.

The UAE central bank's decision on Sunday to provide emergency liquidity to its banks helped ease some concerns and prompted a bounce back in emerging markets across Asia.

Emerging Markets <.MSCIEF> were up 1.18 percent while the MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> rose 2.64 percent.

The safe-haven U.S. dollar fell against a basket of currencies <.DXY> by 0.13 percent as investors' fears of a deterioration in the tepid global economic recovery calmed.

"We've seen risk aversion decrease from the levels we saw on Thursday," said Camilla Sutton, currency strategist at Scotia Capital in Toronto. "All in all, last week just shows how vulnerable markets are to any fears."

The euro was up 0.19 percent at $1.4994. while against the Japanese yen, the dollar was down 0.23 percent at 86.21 after a Japanese official said the government would try to stem the currency's rise, although did not specify any measures. [ID:nT77759]

U.S. Treasuries also retreated unwinding gains made late last week on safe-haven buying.

Benchmark 10-year Treasury notes traded 11/32 lower in price, its yield rising to 3.24 percent from 3.21 percent late Friday. Two-year Treasury notes were flat, yielding 0.70 percent. The yields dipped to 0.62 percent Friday, the lowest since last December.

SHOPPING IN FOCUS

U.S. stocks fell by midday in New York as investors worried that the holiday shopping season might have gotten off to a tepid start as consumers trimmed purchases over the Thanksgiving Day holiday amid concerns about an uncertain economy.

The Dow Jones industrial average <.DJI> was down 0.31 percent, at 10,278.03. The Standard & Poor's 500 Index <.SPX> was down 0.33 percent, at 1,087.94 while the Nasdaq Composite Index <.IXIC> was down 0.65 percent, at 2,124.45.

Consumer spending, the backbone of the U.S. economy accounting for two-thirds of activity, was significantly less per person at the start of the holiday season even than last year, when Lehman Brothers' cataclysmic collapse paralyzed the global financial system.

Meanwhile, European shares fell to their lowest close in more than three weeks, with oil companies among the biggest fallers, as worries about Dubai's debt continued to unsettle European equity markets.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 1.3 percent lower at 986.70 points, the lowest close since Nov 4. The index rose 1 percent in November and is up nearly 53 percent from a lifetime low it hit on March 9.

Dubai's government said on Monday it was not responsible for the debts of its flagship conglomerate, offering little clarity on a plan to delay billions in debt repayments that has rattled world markets. [ID:nSP362937]

Dubai's benchmark index closed 7.3 percent lower on Monday.

"The new theme is sovereign crises, rather than the banking crisis. But, perversely, these kind of risks mean that interest rates will stay low. No government in its right mind will start to tighten all of a sudden. We think the market will go higher." said Teun Draaisma, equity strategist at Morgan Stanley, in London.

UK banks have the biggest loan exposure to the UAE. (Additional reporting by Wanfeng Zhou in New York, Mike Dolan and Brian Gorman in London;Editing by Andrew Hay ) ((Multimedia versions of Reuters Top News are now available

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