* Markets up for third day after euro zone conference call
* European shares up more than 1 pct, Nikkei gains 1.8 pct
* Euro steadies after initial dip
* Oil down 0.2-0.4 percent, Brent crude at $112 a barrel
By Patrick Graham
LONDON, Sept 15 (Reuters) - Stock markets rose for a third day on Thursday and the euro steadied, helped by signs that euro zone leaders are committed to keeping Greece afloat for now.
European markets rose by almost 2 percent before trimming gains, with banking shares recovering from an initial dip on news of a $2 billion loss for Swiss bank UBS due to unauthorised trading by a London-based employee.
Worries over the euro zone crisis and a global slide into recession have hammered shares since late July and there was little conviction this week's gains were anything other than just a breather.
"Given the fact that we are not seeing much more than rhetoric at the moment, many people are still expecting Greece to default and see the move up as nothing more than a relief rally," Zahid Mahmood, trader at Capital Spreads, said.
French and German leaders urged Greece's prime minister in a conference call late on Wednesday to meet the terms of its new bailout and said they were determined to keep the country in the euro zone.
A Greek government official said afterwards that Athens looked set to get approval from EU and IMF inspectors for the issue of its next tranche of debt.
A senior German lawmaker sounded similar noises early on Thursday and Spain also added to the mix by successfully placing bonds, albeit at relatively high yields.
At 0930 GMT, European stocks were up 1.2 percent, reflecting strong gains for all the major markets and a 1 percent higher close for Wall Street overnight .
World stocks gained 0.7 percent, helped by Japan's Nikkei share average closing 1.8 percent higher.
The euro traded virtually flat on the session.
CREDIT CRUNCH
The euro gained sharply on the assurances from the Greek conference call but it later pulled back and looked set to stay weak on worries about Athens' ability to avoid a debt default in the months ahead.
European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a "systemic" crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.
Market players, spooked by fears a default in the euro bloc could unleash a financial crisis, remain ready to sell the currency and risk assets into any rally. The single currency was almost unchanged on the day at 1.3770 to the dollar, off highs hit late on Wednesday.
"The comments from Merkel and Sarkozy have supported sentiment in the short-term but there's not much scope for a serious improvement in attitudes towards the periphery or overall growth conditions in the euro zone right now," said Manuel Oliveri, currency strategist at UBS in Zurich.
"It's also quite likely the ECB will need to take a more dovish stance so we don't think the euro will stay supported for long," he added.
The improvement in tone hit many perceived safe-haven assets, including the dollar and U.S. Treasuries and German Bund futures .
Oil traded up near $113, although the upside was capped as the market awaited a bundle of data from the United States for an update on the progress of the economic recovery.
Brent crude