World stocks rose from a two-month low on Thursday while the euro hit a one-week peak versus the dollar, aided by higher commodities and a report on China's possible interest in bailout bonds for Portugal.
Gains on Wall Street overnight, ending a three-day losing streak, also encouraged investors to buy risky assets, although uncertainty over whether Greece would need to restructure its debt capped gains.
In the wake of a Wall Street having a mildly positive session, you would expect some more of Monday's losses to be clawed back, said Jeremy Batstone-Carr, strategist at Charles Stanley.
The Financial Times quoted the head of the European Financial Stability Facility (EFSF) as saying China and other Asian investors were expected to buy a strong proportion of Portuguese bailout bonds when the euro zone's rescue fund starts auctioning them next month.
However, investors remain concerned about the possibility of Greek debt restructuring, uncertainty over whether Greece will agree new austerity measures and the potential for contagion into the likes of Spain and Italy.
There are ongoing concerns about euro zone peripheral debt. We're not out of the woods by any stretch of the imagination, Batstone-Carr said.
MSCI world equity index rose 0.6 percent, bringing its gains this year to three percent. The FTSEurofirst 300 index <.FTEU3> added 0.2 percent.
Emerging stocks gained 1.2 percent.
The dollar <.DXY> fell half a percent against a basket of major currencies. The euro rose 0.7 percent to $1.4186.
A weaker dollar helped U.S. crude oil rise a quarter percent to $101.60 a barrel. Brent crude added 0.2 percent to $115.12 a barrel.
Underlying strong commodities demand, the Baltic Dry Index <.BADI>, which tracks rates to ship dry commodities, rose to its highest level in seven weeks on Wednesday.
GREEK YIELDS RISE
The Greek government is scrambling to resolve a stand-off with its opposition over austerity measures and Greece's EU commissioner warned on Wednesday that its euro membership was at risk if it failed to agree to sacrifices.
Greek two-year yields rose 43 basis points to 26.9 percent but the premium investors demand to hold Spanish and Italian government bonds rather than benchmark German Bunds fell after the FT report on China.
The EFSF will hold its first auction to raise funds for the recently-approved 78 billion euro Portuguese bailout in mid-June.
We know central banks are buying a lot of this kind of paper, it's just a bit of positive news amongst all the noise on Greece, said a trader.
But there seems to be growing political dissent on further bailouts so it's really down to Greece to get their house in order.
(Additional reporting by Blaise Robinson, editing by Mike Peacock)