World stocks rose from last week's 7-week low on Monday as hopes grew euro zone leaders would unveil fresh measures to resolve the two-year-old debt crisis, while caution ahead of next week's key summit kept the euro and German yields under pressure.
An unsourced report in Italian daily La Stampa suggested the International Monetary Fund was preparing a rescue plan for Italy worth up to 600 billion euros ($796 billion), later dismissed by an IMF spokesperson.
But a downgrade in Belgium's sovereign rating late on Friday and a warning by Moody's that the rapid escalation of the region's sovereign and banking crisis threatens the rating of all European government bonds kept top-rated German debt supported.
The bears out there will know that markets do not go down in a straight line and this could be just a relief rally in what will prove to be a prolonged bear market, said Stan Shamu, strategist at IG Markets.
MSCI world equity index <.MIWD00000PUS> gained 0.9 percent, rising for the first time after ten consecutive days of losses. The index is down nearly 15 percent since January and more than 22 percent since hitting a three-year high in May.
European stocks <.FTEU3> and emerging stocks <.MSCIEF> both rose around 1.5 percent.
U.S. stock futures were up more than 2 percent, pointing to a firmer open on Wall Street later.
The market was also expected to get some support from news that U.S. retailers racked up a record $52.4 billion in sales over the Thanksgiving weekend, a 16.4 percent jump.
U.S. crude oil gained 2.2 percent to $98.92 a barrel.
Bund futures were steady on the day.
After the Italian aid report, Italian/German 10-year government bond yield spread tightened 10 basis points to 496 bps.
The premium investors pay to hold Belgium's 10-year government bonds rather than German debt was largely unchanged from Friday at 368 basis points.
Belgian borrowing costs have increased sharply in past weeks as the country has struggled to set up a government, with the country's benchmark 10-year yield rising near the 6 percent level on Friday, beyond which financing costs could become unsustainable.
A sustained rise in yields is likely to scare some of the long-term euro bond buyers. Kokusai Asset Management, Japan's biggest mutual fund, said it had sold all its Italian, Spanish and Belgian bond holdings, spooked by a jump in Italian bond yields to above 7 percent and other signs that the crisis in Europe was deepening [ID:nL4E7MS152].
Investors will keep a close eye on developments in the euro zone. Documents showed detailed operational rules for the region's bailout fund were ready for approval and will clear the way for the 440 billion euro facility to attract cash from private and public investors in coming weeks.
Officials say Germany and France are exploring ways for rapid fiscal integration among euro zone countries. Germany's original plan was to get all 27 countries on board, but officials have been looking at alternatives such as an agreement among just the euro zone countries or a separate agreement outside the EU treaty that could involve a core of around 8-10 euro zone countries.
The euro fell 0.1 percent to $1.3301.
The dollar <.DXY> fell 0.6 percent against a basket of major currencies.