By Chuck Mikolajczak
NEW YORK (Reuters) - Bond prices rallied and European bank stocks rose on Monday after Portugal devised a plan to prevent the collapse of one of its biggest lenders.
U.S. stocks edged up in early trade, with the S&P 500 <.SPX> coming off its worst week since 2012, as concerns over higher U.S. interest rates eased following Friday's U.S. employment report.
Lisbon on Sunday announced a near 5 billion-euro ($6.6 billion) rescue of the country's largest listed bank, Banco Espirito Santo
"From a technical viewpoint, the market managed on Friday to hold the lower end of the trading range and the fact we did that is helping the market out this morning," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
"News from Portugal certainly is a step in the right direction and after the sharp losses of last week, the market needs to catch its breath."
Portugal's 10-year yield fell to 3.575 percent, down 7 basis points, as investors bought the bonds on relief after the package was announced. Other European bond markets also rallied, with yields on Spanish and Italian bonds moving lower.
The FTSEurofirst 300 index of leading shares was down 0.02 percent, giving up early gains. Pan-European banking stocks were up 0.4 percent, however.
The MSCI All-World Index rose marginally, up 0.1 percent.
U.S. financial shares rose, lifted by a 1.4 percent gain in Berkshire Hathaway
The Dow Jones industrial average was up 11.56 points, or 0.07 percent, at 16,504.93. The Standard & Poor's 500 Index was up 3.66 points, or 0.19 percent, at 1,928.81. The Nasdaq Composite Index was up 13.13 points, or 0.30 percent, at 4,365.77.
FED FEARS EASE
The rate-sensitive U.S. two-year Treasury note yield was little changed at 0.47 percent and the 10-year yield fell to 2.48 percent, declining in tandem with European yields.
Bond yields were also capped by Friday's U.S. jobs data for July, which showed job growth lower than forecast, the unemployment rate higher than expected, and almost no growth at all in average hourly earnings.
A Reuters poll on Friday after the jobs data showed that a majority of top Wall Street bond firms do not see a rise in U.S. interest rates before the second half of next year.
Major currencies were flat on Monday. The euro was at $1.3423, off last week's eight-month low of $1.3365, while the dollar stood at 102.50 yen, off Wednesday's four-month peak of 103.08 yen.
U.S. crude oil futures were up 34 cents at $98.22 per barrel, recovering from a six-month low of $97.09 on Friday, and Brent crude was up 55 cents at $105.39. Spot gold was little changed at $1,290.49 an ounce.
(Reporting by Chuck Mikolajczak; Editing by Dan Grebler)
