GLOBAL MARKETS-Euro recovers, oil gains as Greek aid deal looms

* Euro recovers, buoyed by hopes of Greek rescue package

* Risk premiums fall as investors sense Greek deal

* Oil rises toward $85 a barrel as EU debt woes ease

* Global stocks rise as risk appetite returns to markets (Updates with closing of European markets)

By Herbert Lash

NEW YORK, April 29 (Reuters) - Global markets staged a relief rally on Thursday as Greece's move to enact severe austerity measures to secure an aid package eased fears that the debt crisis will spread across Europe, driving up the euro and fueling a more than 1 percent rise in equities.

With a potential resolution of Greece's debt problems insight, risk premiums eased and crude oil prices rose above $85 a barrel.

Global equities rose more than 1 percent after two days of losses, also helped by strong earnings reports and further signs of economic recovery. The Federal Reserve's positive view of the U.S. economy on Wednesday added to an increase in sentiment. For details see: [ID:nSGE63S07H]

Officials of the European Central Bank, European Union and International Monetary Fund were in Athens to negotiate what could be the largest bailout in history. Sources familiar with the talks said details of a three-year deal would come by Monday. [ID:nLDE63S0BL]

The news of an expected aid package of up to 135 billion euros ($180 billion) caused debt yield premiums eased, and the cost of insuring riskier debt dropped as investors grew more confident a deal was in sight.

Uncertainty over the size and timing of a planned aid package for Greece has weighed on markets for weeks, while concerns of spreading sovereign credit risk jumped on Wednesday after Standard & Poor's cut Spain's rating one notch.

On Tuesday, S&P had slashed Greece to junk status and downgraded Portugal, sparking the latest bout of investors' fears the country could default on its debt. [ID:nLDE63R2J0]

"Concerns about Greece have eased to some extent, but the danger is that there could be new negative news from Portugal or Spain. That (sovereign debt) is a time bomb and nobody knows when its counter reaches zero," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

The euro was up 0.2 percent against the dollar to $1.3243, after earlier hitting a high of $1.3280.

A better-than-expected rise in euro zone economic sentiment in April, which could boost consumer spending and consumption, also boosted investors' appetite for risk. [ID:nBRLTFE60X]

In the United States, data that showed the number of U.S. workers submitting new claims for unemployment benefits fell slightly last week drew mixed views, as it implied only a gradual labor market improvement.

European stocks rose, recovering from the market's worst two-day slide in nearly three months, following a slight easing in Asian equity markets. Wall Street pushed higher.

The FTSEurofirst 300 <.FTEU3> index of top European shares closed 1.3 percent higher at 1,070.06 points

Positive corporate results continued to raise investors' risk appetite, with Banco Santander up 4 percent after the euro zone's largest bank posted forecast-beating results.

In the United States, profits from Aetna Inc and Visa Inc beat expectations but Procter & Gamble Co forecast results below expectations and Exxon Mobil Corp posted earnings that were below expectations.

"Markets have expressed some relief ... at the fact that there'll probably be a Greece rescue package in the next 24 to 48 hours, and there have also been good earnings from both U.S. and European companies," said David Thurtell, an analyst at Citigroup. "So the color has been returned to the cheeks of some fairly distraught traders."

The Dow Jones industrial average <.DJI> was up 131.95 points, or 1.19 percent, at 11,177.22. The Standard & Poor's 500 Index <.SPX> was up 15.24 points, or 1.28 percent, at 1,206.60. The Nasdaq Composite Index <.IXIC> was up 30.19 points, or 1.22 percent, at 2,501.87.

MSCI's all-country world index of stocks <.MIWD00000PUS> rose 1.2 percent.

U.S. crude for June delivery rose $1.81 to $85.03. ICE Brent crude for June rose $1.17 to $87.33.

U.S. Treasury debt prices were little changed.. The benchmark 10-year U.S. Treasury note was unchanged in price to yield 3.77 percent.

Spot gold prices were unchanged at $1,164.90 an ounce.

The MSCI index of Asian stocks outside of Japan <.MIAPJ0000PUS> was off 0.1 percent, while Japanese markets were closed for the start of the country's long Golden Week holiday. (Reporting by Ryan Vlastelica, Vivianne Rodrigues, Richard Leong in New York; George Matlock, Emma Farge in London; Blaise Robinson in Paris; Writing by Herbert Lash, Editing by Chizu Nomiyama; Editing by Leslie Adler)