Stocks, oil firmer on U.S. economic optimism

The euro held above last week's 9-week low against the dollar after Der Spiegel reported on Saturday that Germany's finance ministry had prepared a bail-out plan for Greece under which countries using the euro would provide aid worth between 20-25 billion euros.

Last week's surprise rise in the Federal Reserve's emergency lending rate initially spooked investors, some of whom feared the move would bring forward broader policy tightening.

But comments from various Fed officials and Friday's data showing benign U.S. inflation allayed concerns and investors are increasingly viewing last week's move as a vote of confidence in the world's biggest economy.

Asian shares have been firm and the U.S. was higher on Friday, giving support to Europe, said Bernard McAlinden, market strategist at NCB Stockbrokers.

There might be some near-term relief on Greece. The market has given it some benefit of the doubt that they will meet the requirements, but that is far from given and the markets can be quite fickle.

MSCI's world equity index <.MIWD00000PUS> rose 0.6 percent while the FTSEurofirst 300 index <.FTEU3> gained 0.15 percent, driven by basic resource shares <.SXPP>.

Emerging stocks <.MSCIEF> rose 1.4 percent, while Shanghai stocks <.SSEC> finished the first trading day after a week-long break down as concerns persisted about further tightening in China's monetary policy.

The Chinese central bank raised banks' required reserves earlier this month.

U.S. crude oil rose 0.2 percent to $79.95 a barrel, helped by optimism on the U.S. economy and supply concerns stemming from an extended refinery strike in France and escalating tensions over Iran's nuclear program.

Bund futures rose 40 ticks. The premium that investors demand for holding Greek debt rather than Germany's fell 3 basis points to 314 basis points.

The dollar <.DXY> fell 0.2 percent against a basket of major currencies while the euro was steady at $1.3629 after the report on Greece.

Citing initial considerations by the ministry, Der Spiegel said the share of financial aid for Greece would be calculated according to the proportion of capital each country holds in the European Central Bank.

While such an outcome may provide some initial support for the euro, the longer term implications of such action will likely prove even more negative for the euro, BNP Paribas said in a note to clients.

Overall, the adjustment process in Europe will have strong deflationary pressures, suggesting that ECB policy will remain much looser than the market is currently assuming.

(Additional reporting by Joanne Frearson; editing by Robin Pomeroy)