GLOBAL MARKETS-Euro gains on debt crisis hopes, equities slide

* Global stocks reverse course to fall on sour U.S. data

* Euro hits 8-week high vs dollar as sovereign fears wane

* U.S. crude slips on economic doubts but metals rally

* Bonds rise on equity weakness but remain stuck in range (Updates with close of European markets)

By Herbert Lash

NEW YORK, Jan 19 (Reuters) - The euro rose to an eight-week high on Wednesday on increasing optimism about containing the debt crisis in Europe, but sour U.S. housing data took the steam out of a commodity rally and weighed on equity prices.

The euro climbed more 1 percent to hit $1.3538, according to Reuters data, helped by Asian sovereign buying and continued short-covering. For details see [ID:nN19220726]

The euro could extend gains in coming weeks as hope builds that policymakers will control a smoldering debt crisis that engulfed Greece and Ireland in 2010.

"People are very impressed with the determination of European officials and are expecting them to successfully deal with the sovereign debt crisis," said Steven Englander, head of G10 strategy at CitiFX in New York.

German newspaper Die Zeit, citing government sources, reported Berlin is considering a plan to allow Greece to buy back its own debt using euro zone crisis funds. Some investors saw that report as a possible step forward in efforts to quell the debt crisis. [ID:nLDE70I158]

Also helping the euro was news that Germany raised its 2011 growth forecast by half a percentage point to 2.3 percent. Officials said the recovery in Europe's powerhouse will broaden and that previously sluggish domestic demand will pick up. [ID:nLDE70I0F8]

World equities rose to their highest in nearly 2-1/2 years, but later erased gains after a drop in quarterly profit at Goldman Sachs <GS.N> deflated some of the optimism about corporate results following Apple's <AAPL.O> strong report on Tuesday.

MSCI's all-country world index for stocks <.MIWD00000PUS> fell 0.2 percent, paring gains that had lifted the index earlier in the session to highs last seen in August 2008.

European shares ended lower after hitting 28-month highs, as Goldman's disappointing results and a fall in U.S. housing starts hurt sentiment and led some investors to take profits. [ID:nLDE70I1YP]

The FTSEurofirst 300 <.FTEU3> index of top European shares finished 1.3 percent lower at 1,152.48 points.

The trend is higher as earnings will be favorable, profit margins are high and demand is improving, said Klaus Wiener, chief economist at Generali Investments in Cologne, Germany.

"This is just a blip in the market, which is otherwise drifting higher. What we are seeing now is some profit taking and I would not read too much into that," Wiener said.

On Wall Street, the Dow Jones industrial average <.DJI> was down 0.04 points at 11,837.89. The Standard & Poor's 500 Index <.SPX> was down 8.36 points, or 0.65 percent, at 1,286.66. The Nasdaq Composite Index <.IXIC> was down 26.67 points, or 0.96 percent, at 2,739.18.

"Expectations were for some better results after a fairly robust fourth quarter and start to 2011," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

While Villalta said he is still bullish on financials for 2011, data from Thomson Reuters StarMine last week suggested most banks would miss earnings expectations.

Oil prices reversed earlier gains after stocks declined and the weak U.S. housing data outweighed a softer dollar. [ID:nL3E7CJ09E]

U.S. crude oil prices <CLc1> fell by 0.2 percent to $91.18 a barrel. ICE Brent futures <LCOc1> for March were better supported, helped by North Sea oil outages, and managed to rebound, up 59 cents to $98.39.

Copper hit a record high on a weaker dollar and resilient fundamentals but turned negative after U.S. housing starts slid more than expected and equities markets dipped. [ID:nLDE70I1K7]

Gold rallied for a third consecutive session, boosted by broad weakness in the dollar and robust Asian consumer demand, while anticipation of more resilient global growth took platinum to 30-month highs. [ID:nLDE70I0UY]

Spot gold prices <XAU=> rose $3.30 to $1,370.50 an ounce.

U.S. Treasuries rose as the decline in equities stoked safe-haven demand for bonds, although it was not enough to push the market out of a recent trading range. [ID:nN19443269]

The benchmark 10-year U.S. Treasury note <US10YT=RR> was up 7/32 in price to yield 3.34 percent.

The dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> off 0.60 percent at 78.487.

Earlier in Asia, the benchmark Nikkei <.N225> in Tokyo ended up 0.4 percent, while the MSCI index of Asia and Pacific shares excluding Japan <.MIAPJ0000PUS> rose 1 percent. (Reporting by Caroline Valetkevitch, Julie Haviv, Richard Leong in New York; Kirsten Donovan, Jessica Mortimer, Emma Farge, Amanda Cooper, Silvia Antonioli in London; Blaise Robinson in Paris; Writing by Herbert Lash; Editing by Kenneth Barry)