GLOBAL MARKETS-Oil falls, stocks edge up as Mubarak resigns

* Mubarak's resignation revives some risk appetite

* Stocks rise, oil falls, gold and Treasuries trim gains

* Dollar briefly pares losses but remains broadly strong (Updates with European markets' close)

By Walter Brandimarte

NEW YORK, Feb 11 (Reuters) - Oil prices fell and world stocks rose modestly on Friday after Egyptian President Hosni Mubarak stepped down following more than two weeks of popular unrest that roiled financial markets.

Prices of gold and U.S. Treasury bonds erased some of their gains as Mubarak's departure partially revived investors' appetite for risk. Many were still concerned, however, about the transfer of power in Egypt and potential new uprisings in other Middle Eastern countries impacting oil prices.

The uncertainty kept the U.S. dollar strong against other major currencies. Also supporting the greenback was data showing the U.S. economic recovery is gaining traction.

"Initially you'll see a pop in the market and oil come off on the hope that this prevents violence in the streets of Egypt. But as we go forward, we'll start wondering what's next for the country," said Jay Suskind, senior vice president at Duncan-Williams in Jersey City.

Mubarak ceded power to a military council, which will run the affairs of the Arab world's most populous nation. A free and fair presidential election has been promised for September. For details, see [ID:nLDE7192NZ].

U.S. crude oil prices, which had been rising on fears of potential disruptions in supply from the Middle East, fell $1.18, or 1.36 percent, to $85.55 per barrel.

Key U.S. stock indexes erased early losses to trade with modest gains.

The Dow Jones industrial average <.DJI> was nearly flat at 12,229.82 while the Standard & Poor's 500 Index <.SPX> rose 1.77 points, or 0.13 percent, to 1,323.64. The Nasdaq Composite Index <.IXIC> climbed 5.96 points, or 0.21 percent, to 2,796.41.

In Europe, the FTSEurofirst 300 <.FTEU3> index of top shares closed 0.41 percent higher. MSCI's benchmark All-Country World Index <.MIWD00000PUS> was little changed at 340.83 points.

"It looks like the stock market is taking the news well," said Gary Thayer, chief macro strategist with Wells Fargo in St. Louis.

"One thing that has weighed on investor sentiment is that the price of oil would go up in the case of political turmoil, and Mubarak's leaving reduces that possibility."

Despite a slight return in risk appetite, the dollar kept gains. It was rising 0.46 percent against a basket of major currencies, according to the U.S. Dollar Index <.DXY>. Against the Japanese yen, it rose 0.29 percent to 83.50.

A survey showing U.S. consumer sentiment rose to its highest level in eight months in early February also supported the greenback as it suggested the U.S. economic recovery was on track. Stronger economic growth may eventually translate into higher Treasuries yields and boost the appeal of the dollar.

The euro fell 0.61 percent to $1.351, also pressured by a fresh bout of concerns about the euro zone sovereign debt crisis.

"There are bigger things driving the euro right now," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

"The concerns most heavily weighing on the euro -- the ongoing debt crisis -- are still there, and for now, the downside is still in play," he said.

U.S Treasury prices shed some gains after Mubarak's resignation, but benchmark 10-year notes were still up 15/32 in price, with the yield at 3.6457 percent. (Additional reporting by Rodrigo Campos, Richard Leong and Steven C. Johnson; Editing by Kenneth Barry)