* Euro up on Greek aid hopes; off highs on German comments
* Weak U.S. data weighs on dollar
* Stocks rise; oil ends up more than $2 a barrel
* Bonds up as weak U.S. data trumps confidence over Greece (Recasts; updates prices and market activity to close)
By Barani Krishnan and Herbert Lash
NEW YORK, May 31 (Reuters) - The euro climbed to a three-week high against the dollar, global stocks powered ahead and crude oil rose on Tuesday on expectations that a second financial aid package would be approved for Greece.
On Wall Street, shares rose more than 1 percent on a late rally, after paring gains earlier following disappointing data on U.S. consumer confidence business confidence in the U.S. Midwest.
European stocks hit a 2-1/2-week closing high, led by banking stocks, with Greek banks <.FTATBNK> up 10.1 percent as the euro rose.
The weaker dollar helped lift commodities, driving up oil 2 percent in New York, its biggest gain in nearly two weeks, while copper closed at four-week highs in London.
European officials met in Vienna to sketch out options for a second bailout package for Greece, with private sector participation still under discussion to help relieve the country of its heavy debt burden.
Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece, The Wall Street Journal reported, citing people familiar with the matter [ID:nL3E7GU21K].
"More aid for Greece does not solve the problem, but it does buy time and limit contagion risk into Ireland, another country with funding requirements in 2012," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
The euro
Even then, there were doubts the gains could be sustained.
"I would fade this rally in the euro for now," said Valentin Marinov, currency strategist at Citi. "Investors will be looking for a more lasting resolution to the Greek debt problems and our economists haven't ruled out the possibility of a voluntary restructuring involving private bondholders."
On Wall Street, the optimism on aid for Greece drove sentiment, overshadowing another round of weaker-than-expected U.S. economic data.
The Conference Board, an industry group, said its index of consumer attitudes fell in May to 60.8 from a revised 66.0 in April [ID:nN9E7G401Y], and the Institute for Supply Management-Chicago's index of Midwest business activity dropped 11 points in May from April.
The Institute for Supply Management-Chicago's index of Midwest business activity fell in May to 56.6 from 67.6 in April.
U.S. single-family home prices also dropped in March to below 2009 levels, according to the S&P/Case Shiller composite index of 20 metropolitan areas, which cited heavy inventory and weak demand. [ID:nN31287627]
On Wall Street, the Dow Jones industrial average <.DJI> was up 127.68 points, or 1.03 percent, at 12,569.26. The Standard & Poor's 500 Index <.SPX> was up 14.08 points, or 1.06 percent, at 1,345.18. The Nasdaq Composite Index <.IXIC> was up 38.44 points, or 1.37 percent, at 2,835.30.
But the grim economic data suggested more hurdles ahead as the S&P closed out its worst month in 10.
"Today is a good day, but the fact that the Dow gave up its early gains and is going to close lower for the month isn't positive," said Donald Selkin, chief market strategist at National Securities in New York. "There's a conflict between the economic reports coming in lower than expected and the hope for resolution out of Greece."
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed 0.8 percent higher at 1,141.24 points.
MSCI's all-country world stock index <.MIWD00000PUS> rose just over 1 percent, while its emerging market index <.MSCIEF> gained 1.7 percent.
The euro pared some of its early gains after a German member of parliament told business newspaper Handelsblatt that Greece should leave the euro zone. [ID:nN31117008] [ID:nB4E7G600C]
May marked the euro's worst month since November, with the single currency weighed down by fears that a new aid package would only provide temporary relief for Greece rather than the intensive surgery required for the country's financial ailments.
The dollar <.DXY> was down nearly half a percent against a basket of currencies.
Assets seen as risky gained.
Oil prices closed up more than $2 per barrel, at above $102
per barrel in New York
Benchmark copper on the London Metal Exchange
The Reuters/Jefferies CRB index <.CRB> of 19 commodities gained 1 percent on the day. A rally in oil toward the end of May limited the index's monthly loss to about 6 percent, from an earlier 10 percent.
U.S. government debt initially fell on the stronger euro and appetite for risk but rebounded after the worrisome U.S. economic data. The benchmark 10-year U.S. Treasury note