Global stocks rise on German backing for ECB bond action

NEW YORK (Reuters) - Global shares rose and the dollar advanced on Friday as apparent support from German Chancellor Angela Merkel for European Central Bank intervention to calm the euro zone's debt troubles helped buoy investor sentiment.

Stocks on Wall Street edged higher and top European stocks hit a 13-month high on speculation that euro zone policymakers might be closer to resolving their differences and work closely to tackle the more than two-year-old debt crisis.

Merkel on Thursday said comments by ECB President Mario Draghi, who recently outlined conditional plans to buy bonds of troubled euro zone governments, were "completely in line" with European leaders and urged the bloc to move swiftly toward a closer integration of fiscal policies.

European shares were on track for their best weekly run in seven years, while the broad S&P 500 index extended a rally that has pushed it to a more than four-month peak.

"It's all about Europe and Merkel's comments coming out, which appeared to support Draghi," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Unless the German constitutional court does something outrageous, we may be moving in the right direction here - at least in the short term."

Germany's constitutional court is expected to deliver a ruling on September 12 on the euro zone's permanent rescue fund, before which Berlin cannot ratify the treaty on it.

The Dow Jones industrial average was up 8.71 points, or 0.07 percent, at 13,258.82. The Standard & Poor's 500 Index was up 0.30 points, or 0.02 percent, at 1,415.81. The Nasdaq Composite Index was up 3.25 points, or 0.11 percent, at 3,065.64.

The FTSEurofirst 300 index was up 0.5 percent at 1,109.43 points, while world stocks were were flat at 325.20.

The dollar hit a five-week high versus the yen, while the euro fell to a session low against the greenback after a survey showed U.S. consumer sentiment picking up in early August to its highest in three months.

The dollar hit its highest since mid-July at 79.53 yen and last traded at 79.52, up 0.25 percent on the day.

The euro fell as low as $1.2306 and last traded at $1.2317, down 0.3 percent on the day, according to Reuters data.

A preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment survey showed its highest level since May at 73.6 from 72.3 in July, topping economists' forecasts for a slight uptick to 72.4.

"Consumers are feeling a little better about the current economy, though a little more concerned about the outlook. Current conditions are at the highest level in about three years. That's encouraging," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis.

Yields on U.S. Treasuries edged down from three-month highs but remained at the upper end of a recent trading range as investors lowered bets the Federal Reserve will launch a new bond purchase program when it meets next month.

The benchmark 10-year U.S. Treasury note was up 7/32 in price to yield 1.8087 percent.

Brent crude oil fell to around $114 after the United States said it was considering the possible release of oil reserves to dampen prices and Israel's president spoke out against a lone Israeli attack on Iran.

Brent crude was down $1.57 to a low of $113.70 a barrel. U.S. crude oil was up 25 cents at $95.85 a barrel.

(Additional reporting by Marc Jones in London; Editing by Dan Grebler)