* German, French leaders hint "Vienna"-type plan for Greece * Reduced anxiety lifts stocks, euro; bonds slip * Oil falls, gold rises as risk aversion stays high * IMF cuts U.S. growth outlook, warns on budget deficits (Recasts lead, updates market action, add analyst quote)
By Richard Leong
NEW YORK, June 17 (Reuters) - Stocks and the euro rose on Friday after the leaders of France and Germany hinted at an aid deal to save Greece from default, but investors will remain on edge until an accord is reached.
Speculation that the heavily indebted euro-zone nation could receive 120 billion euros before it runs out of cash this summer offered a measure of comfort to investors who were rocked by exceptional market volatility this week.
On Friday, investors reduced their holdings of low-risk government bonds following news of the French and German leaders' backing of a Greece aid package.
However, a drop in oil prices and a jump in gold and the Swiss franc -- traditionally seen as a safe-haven currency -- signaled risk aversion remains at elevated levels.
German Chancellor Angela Merkel said on Friday that Germany and France wanted a quick solution to the impasse over a new aid package for Greece similar to the "Vienna Initiative." Under that 2009 pact, lenders agreed to boost credit for central and eastern Europe, while the main commercial banks committed to keep exposure and roll over credit lines.
French President Nicolas Sarkozy chimed in, saying "there was no time to lose," suggesting that a deal to rescue Greece could be reached quickly. See [ID:nPISHHE7SL]
In Greece, Prime Minister George Papandreou appointed a new finance minister in an effort to push through harsh economic reforms amid weeks of public protests. [ID:nLDE75G0CY]
For a guide of the Greek crisis, see [ID:nLDE75G1DB]
"After a couple of volatile sessions earlier this week, the market is taking Sarkozy's words as comfort and that is translating into a rebound this morning," said Andre Bakhos, director of market analytics at Lek Securities in New York.
On Wall Street, the Dow Jones industrial average <.DJI> was up 59.30 points, or 0.49 percent, at 12,020.82. The Standard & Poor's 500 Index <.SPX> was up 5.41 points, or 0.43 percent, at 1,273.05. The Nasdaq Composite Index <.IXIC> was up 2.08 points, or 0.08 percent, at 2,626.78.
If the S&P 500 and Dow hold on to gains, the indexes would record their first positive week in seven. The S&P 500 is almost 7 percent below a three-year high hit on May 2nd.
The FTSEurofirst 300 index <.FTEU3> of top European shares gained 0.3 percent to end at 1,087.89.
The MSCI world equity index <.MIWD00000PUS> rose 0.7 percent to 329.63, rebounding from a three-month low of 326.01 struck earlier in the session. It is on track to end the week lower and has wiped out its gain for the year.
HIGH ANXIETY
The stock market's outlook remains precarious, given the signs of an economic slowdown worldwide and worries persist about the debt problems in Greece, Spain, Portugal and Ireland.
The International Monetary Fund downgraded its forecast for U.S. economic growth on Friday and called for Washington and debt-laden European countries to solve their budget woes. The IMF also said some fast-growing emerging economies might be overheating. For more, see [ID:nEBE7DA01M]
The latest data on consumer sentiment and economic activity signaled the U.S. recovery is wobbly. See [ID:nLDE75G1MC]
Optimism over another lifeline for Greece also boosted Europe's single currency after the euro hit a three-week low against the dollar on Thursday. The euro
The Swiss franc, which strengthens with risk aversion, gained against the dollar
The euro rebounded against the franc to 1.2114 franc
"While we still believe that a new Greek package will be forthcoming, we warn of ongoing headline risk from rating agencies, the IMF, euro-zone politicians and the ECB." said Mark McCormick, currency strategist at Brown Brothers Harriman in New York.
The rebound in stocks and the euro came primarily at bonds' expense. The 10-year U.S. Treasury note
September U.S. Treasury and German Bund futures fell 9/32
Spot gold
In oil trading, U.S. July crude futures