* Euro hits three-week high against dollar; world stocks up
* Germany eyes concessions to ease new Greece bailout -WSJ
* World stocks set for biggest monthly drop since August
* Brent crude heads for worst monthly fall in a year
By Dominic Lau
LONDON, May 31 (Reuters) - The euro rose to a three-week high against the dollar on Tuesday, while world stocks and oil prices advanced on a report that Germany could make concessions to facilitate a new aid package for Greece.
Berlin, which along with some other countries had resisted extra funding, is considering dropping its push for an early rescheduling of Greek bonds, the Wall Street Journal said. [ID:nL3E7GV07I]
That was in line with the tone of comments by Berlin's finance minister last week, although other substantial barriers appear to remain to the provision of extra financial help to deal with Greece's financing needs next year.
Worries over the euro zone debt crisis have driven the euro sharply lower this month and it is on course for its first monthly loss since November.
"There's quite a big risk premium in euro based on Greek default concerns, so if Germany lends more money to get them through to 2013, the chances of a disorderly restructuring further down the line become much reduced," Adrian Schmidt, currency analyst at Lloyds Banking Group, said.
Concerns have intensified after Greece fell short of deficit-reduction goals and the IMF this month pointed to problems with the release of the next tranche of aid, raising the risk of a default on Athens' 327 billion euros of debt.
The euro
Greece's shares <.ATG> climbed 3.8 percent, while the Thomson Reuters Peripheral Eurozone Index <.TRXFLDPIPU> rose 2.5 percent and the FTSEurofirst 300 <.FTEU3> of leading European shares added 1 percent.
Yields on 10-year Greek government bonds
The yield on Germany's benchmark 10-year Bund
Rabobank strategist Richard McGuire said it was likely that any softening of Germany's stance on a "reprofiling" of Greek bonds will prove to be a short-term development designed to avoid the immediate funding crunch that would arise if the IMF were to stop its disbursements.
"With bailout fatigue also increasingly evident on the part of core electorates, this issue is likely to make a return near term and could perhaps feature at the Eurogroup's discussions on Greece on 20 June," he said in a note.
The cost of insuring Greek debt against default fell, with the country's five-year credit default swaps down 43 basis points at 1,400 bps, according to data monitor Markit.
WEAK MAY PERFORMANCE
U.S. stock index futures
World stocks as measured by MSCI All-Country World Index <.MIWD00000PUS> gained 0.9 percent, though the index was on track to register its biggest monthly percentage losses since last August.
Credit Suisse said in note that it is too early to upgrade equities as a number of green lights are still missing for it to turn tactically positive on the asset class.
"Previous mid-cycle corrections have lasted four months and on average have been 12 percent. Globally, markets are down 4 percent since our tactical downgrade (to neutral) on February 17," it said.
In Asia, Japan's Nikkei average <.N225> rose 2 percent, encouraged by predictions of strong industrial output in the coming months, though it ended the month 1.6 percent lower.
Brent crude
Crude prices are still up more than 22 percent this year on supply concerns driven largely by unrest in oil-rich Middle East and North Africa. (Additional reporting by Neal Armstrong, Emelia Sithole, Kirsten Donovan and Blaise Robinson; Editing by Catherine Evans)