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World stocks clambered out of bear market territory on Monday after a pledge from German and French leaders to come up with a plan by the end of the month to tackle Greece's confidence-sapping debt woes and recapitalize European banks.

"I think it is significant that Germany and France came together to show they will not allow big banks to collapse," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo. "Hopes that there won't be an abandoned bank like Lehman will ease excessive worries in the market."

Commodities were steady after surging on Monday as money flowed back into riskier assets.

Shares in China's big four banks leapt after the country's sovereign wealth fund bought their shares in the secondary market on Monday, in Beijing's first move to support stock prices since the 2008 financial crisis.

Japan's Nikkei share average .N225 rose 2.2 percent, partly catching up with gains elsewhere in the region on Monday, when Tokyo was shut for a holiday. .T

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS also rose 2.2 percent, led by a jump in Chinese shares, with Hong Kong's Hang Seng .HSI up 3.6 percent and Shanghai's benchmark .SSEC up 2.8 percent. .HK .SS

RECAPITALISE BANKS

Global markets were buoyed after German Chancellor Angela Merkel and French President Nicolas Sarkozy said they would agree on how to recapitalize European banks and present a plan for accelerating economic coordination in the euro zone by a G20 summit in Cannes on November 3-4.

"In our view that is both a positive and a negative," said Dan Greenhaus, New York-based chief global strategist at broker-dealer BTIG. "It was negative in that no specific details were provided, but positive that they have given a self-imposed deadline."

Greenhaus told Asia-based reporters on a conference call that BTIG believed Europe's banking sector would need an injection of 300-500 billion euros.

"Ultimately the major banks need to be recapitalized, but not recapitalized by an unreachable amount of money," he said.

Wall Street stocks .SPX rose more than 3 percent on Monday and European shares gained nearly 2 percent. .N .EU

MSCI's All-Country World index .MIWD00000PUS now stands around 18 percent below its May high for the year after climbing above the 20 percent loss level -- the rule-of-thumb definition of a bear market -- on Monday.

The euro was firm around $1.3648 on Tuesday, after surging as much as 3 cents to a high just below $1.37 in the previous session. The single currency edged up against the yen to around 104.60.

The dollar was flat against a basket of currencies .DXY, and U.S. Treasuries fell as investors appetite for riskier assets returned, with the 10-year yield rising 10 basis points to around 2.164 percent.

Oil edged up, with U.S. crude up 25 cents at $85.65 a barrel and Brent crude gaining 15 cents to $109.10.

Gold, which in recent weeks has switched from a negative to a positive correlation with riskier assets such as industrial commodities and stocks as safe haven investors turned instead to the dollar, rose 0.4 percent to around $1,684 an ounce.

(Additional reporting by Hideyuki Sano; Editing by Ramya Venugopal)

The gains lifted the S&P 500 above its 50-day moving average for the first time since late July, a bullish technical signal. The S&P 500 is now up about 11 percent since its low on Tuesday, when it briefly fell into bear-market territory.

Financials, the most beaten-down stocks during the recent slide, led the rally. The KBW bank index jumped 5.3 percent, with JPMorgan Chase & Co up 5.2 percent at $32.30 and Bank of America up 6.4 percent at $6.28.

The gains, however, came on the second-lightest day of trading since July and may not be indicative of a long-term trend. The advance has been driven by short-covering and managers buying stocks as they try to catch up to the sharp rally built on headlines out of Europe.

"There's basically a rally coming off deeply oversold levels," said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon.

"What's happening is traders are shorting the dollar, and using funds there, and piling into risk-based assets," including equities, he said. The euro, with which the S&P 500 has had a strong correlation, rose the most in 15 months against the dollar.

German Chancellor Angela Merkel and French President Nicolas Sarkozy promised on Sunday to unveil a comprehensive new package to ease the euro zone's debt crisis.

Earnings season is set to begin with Alcoa's report tomorrow after the closing bell and will likely become a driver for stocks in coming weeks.

The Dow Jones industrial average surged 330.06 points, or 2.97 percent, to end at 11,433.18. The Standard & Poor's 500 Index climbed 39.43 points, or 3.41 percent, to 1,194.89. The Nasdaq Composite Index shot up 86.70 points, or 3.50 percent, to close at 2,566.05.

The S&P 500's next resistance levels are 1,200 and 1,230.

Adding to optimism that there may be a resolution of the euro zone's problems, a move to nationalize Franco-Belgian bank Dexia was seen as an indication that governments would step in and keep large lenders from failing.

The energy and materials sectors also ranked among the day's strongest-performing sectors, while the Dow Jones Transportation Average gained 3.9 percent. Tech provided another source of strength, with the Philadelphia semiconductor index up 2.8 percent.

The materials and energy sectors are forecast to have had the highest earnings growth rates for the third quarter, Thomson Reuters data showed. Shares of aluminum company Alcoa, which is one of the 30 Dow industrials, jumped 3.9 percent to $10.09.

Volume was lighter than average, possibly affected by the U.S. Columbus Day holiday. Government offices and the Treasury bond market were closed for the holiday.

About 6.82 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq for the day, below the year's daily average so far of 8.03 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of nearly 11 to 1, while on the Nasdaq, advancers beat decliners by nearly 5 to 1.

(Reporting by Caroline Valetkevitch; Additional reporting by Rodrigo Campos; Editing by Jan Paschal)

Companies in a range of businesses, including hair salons, restaurants, renewable energy, and the paper industry, have tumbled into Chapter 11 in the past few months.

The weak economy, lackluster consumer spending, a shaky junk-bond market and increasingly tight lending practices are also threatening struggling companies in industries as diverse as shipping, tourism, media, energy and real estate.

AMR Corp's American Airlines may need to go to court to restructure its labor contracts, though a spokesman for the airline reiterated on Monday that bankruptcy is not the company's goal or preference.

Kodak confirmed that a law firm known for taking companies through bankruptcy has been advising on strategy as attempts to overcome the loss of its traditional photography business falter. It has denied any intention of filing for bankruptcy.

Some bankruptcy and restructuring experts warn a fresh U.S. recession could trigger a string of failures to rival the one that followed Lehman Brothers, which in 2008 filed the biggest bankruptcy in U.S. history.

"It's getting busier for everyone I know," said Jay Goffman, the co-head of the Global Restructuring Group at law firm Skadden Arps, Slate, Meagher & Flom. "I think 2012 will be a busy year and 2013 and 2014 will be extraordinarily busy years in restructuring."

No one is currently predicting a second Lehman-type collapse. Its $639 billion bankruptcy came after a loss of confidence in the investment bank as asset values plummeted, leading to the drying up of credit lines.

In fact, predicting a bankruptcy wave at all is a tricky task, experts say. It could depend on several unknowns: how much money banks and other institutions are willing to lend troubled companies, whether the economy lands in a double-dip recession and what happens in the European debt crisis.

The sovereign debt crisis in Europe could be the most important X factor. Even the experts who say that a bankruptcy crisis is not coming because current low interest rates make it easy for companies to get cash to finance their way out of trouble, say that the euro zone's problems could trigger defaults here.

"It is possible that one or two sovereign debt defaults would increase the pressure we'd feel in the U.S. credit market. Then we might see an environment like we had in 2008," said Peter Fitzsimmons, president for North America for turnaround advisory firm AlixPartners LLP.

MORE FILINGS

Chapter 11 filings are picking up, bankruptcy data show. Ten companies with at least $100 million in assets filed for bankruptcy in September, the most since 17 filed in April, which was the busiest month since 2009, according to Bankruptcydata.com.

For a graphic click here link.reuters.com/nuw34sp:

Recent failures included renewable energy companies Evergreen Solar and Solyndra. The latter collapsed in a politically-charged bankruptcy after taking a $535 million loan from the federal government.

Other recent bankruptcies include glossy magazine paper manufacturer NewPage Corp, which was the largest bankruptcy of the year and the largest non-financial company filing since 2009; Graceway Pharmaceuticals, which makes skin creams; Hussey Copper Corp., which makes the copper bars used in switchboards, and the Dallas Stars of the National Hockey League.

So far this month, five companies with more than $100 million in assets have filed, including the Friendly's ice cream chain - and wireless broadband company Open Range Communications Inc.

It is difficult to predict trends in filings. For example, experts who focused on macroeconomic credit indicators and default projections in 2006 or 2007 wouldn't in many cases have been prepared for the severity of failures that followed.

In 2009, General Motors, Chrysler Group, LyondellBasell Industries and General Growth Properties all filed for bankruptcy, contributing to a record number of filings and topped the list of largest bankruptcies ever.

At the same time, some experts were predicting an even deeper and longer list of corporate collapses. But within a year of bankruptcy filings breaking records, banks and other financial institutions were buying debt and lending, making it easy for companies to finance their way out of trouble.

Two months after Lehman failed, the U.S. Federal Reserve slashed rates to near zero. Once confidence began to return to the debt markets, investors flocked to high-yield bonds sold by ailing companies, allowing them to refinance.

Other failing companies were able to "amend and extend" - or to critics, "amend and pretend" - by striking new borrowing terms with lenders that delayed debt maturities in the hopes the economy would rebound smartly and business would pick up.

Those measures often avoided operational overhauls, creating what some experts called "zombie companies" that cut staff and prices to survive, but were too sick to invest in new projects.

Bankruptcy court allows troubled companies to shed debt and also become more operationally efficient as they renegotiate labor contracts, as airlines have done, or reject pricey store leases, which retailers often do.

But these changes do not always work, especially when companies find little support among suppliers or creditors for their turnaround plans. Bankrupt book chain Borders, for instance, recently closed its doors after failing to find a buyer.

In addition, confidence in the economy and easy access to debt allowed companies to complete restructurings in 2009 and 2010 with business plans and debt loads that were based on an economic pickup that has now faltered. That could create the potential for trouble at companies that have already restructured once.

The European debt crisis and worries about U.S. growth pressured the market greatly in recent months. Since hitting 13-month lows last week, though, stocks have rallied sharply, putting bullish investors back in the driver's seat as shorts scramble to cover big bets.

This feel good mood may not be over.

The market's lousy psychology for most of the past two months -- built on expectations for poor economic growth and a worsening euro-zone crisis -- could mean investors are still expecting disappointments. Such cautious expectations might end up helping stocks if results are not dismal.

"I think the worst-case scenario has already been built into these stocks because of Europe," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

The earnings period is due to kick off on Tuesday, when Alcoa is due to report after the market's close. Google and JPMorgan Chase are expected to report on Thursday.

Analysts' forecasts for S&P 500 companies' profits have come down slightly in recent weeks. They expect a rise in profits of 12.6 percent compared with the third quarter a year ago. On July 1 their forecast was for 17 percent growth, Thomson Reuters data showed.

Given the big losses stocks have seen recently, gains could actually be in store for the market, some analysts argue. The benchmark Standard & Poor's 500 index is down roughly 10 percent since the beginning of the third quarter.

"We're of the belief that when we get some news out, the market's reaction is probably going to be positive just due to the fact that we've clearly priced in a lot of pessimism," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

VALUATIONS STILL COMPELLING

Investors have worried that the European debt and U.S. growth problems, as well as possibly less-robust expansion in China, hurt third-quarter results. With recent U.S. economic data coming in better than expected, it has given investors hope that company results will be strong enough to bolster stock prices.

Unlike the euro-zone crisis, a vast problem that causes investors to respond mostly at an emotional level, earnings reports allow for direct comparisons to current market valuations. And by many measures, stocks are relatively cheap.

The price-to-earnings ratio of the S&P, that is, a measure of the price paid for a share relative to the company's profit, is low by historical standards. The S&P 500's forward P/E of 10.8 is at its lowest in roughly 10 years.

"Even if the earnings deteriorate somewhat, you're still in a good area," said Standard & Poor's analyst Howard Silverblatt.

The third quarter is still on track to be the second-highest earnings period, in dollar terms, on record after the second quarter, Silverblatt said.

Thomson Reuters estimates third-quarter earnings will total $230 billion.

Sectors expected to see the biggest growth are energy and materials, with gold repeatedly hitting records in recent months and oil at historically high levels, Thomson Reuters data showed.

"There's a lot of a cushion already built into the average stock to compensate for a variance in earnings plus or minus," said Mendelsohn.

Mike Jackson, founder of Denver-based investment firm T3 Equity Labs, sees a high probability of an earnings upside surprise this reporting period.

In terms of sectors, he puts industrials on top in terms of the potential for an upside earnings surprise, followed by utilities, financials, consumer staples and information technology.

"You've got the true driver of the market (earnings) continuing to go forward and the market going south. That's unusual," he said. "There's a fairly good chance of surprise at the index level and at the sector level."

(Reporting by Caroline Valetkevitch; Editing by Andrew Hay)

Government offices and bond markets are closed for the Columbus Day holiday, although U.S. stock markets will be open.

Superior Energy Services Inc (SPN.N) has agreed to buy Complete Production Services Inc (CPX.N) in a cash-and-stock deal valued at $2.7 billion, creating an entity that could expand its footprint in the oil-field services sector.

The yuan hit a record high against the dollar on Monday, now up 30 percent on the U.S. currency since its landmark revaluation in July 2005, as worries over dollar liquidity eased.

The leaders of Germany and France have promised to unveil new measures to solve the euro zone's debt crisis by the end of the month, as international pressure builds for bold steps from Europe to avert an economic backlash of global proportions.

Franco-Belgian bank Dexia (DEXI.BR) agreed early on Monday to the nationalization of its Belgian banking division and secured state guarantees in a rescue that could pressure other euro zone governments to strengthen their banking sectors.

The Brent crude oil price rose above $106 a barrel, fueled by optimism that demand in the world's largest consumer nation would hold after U.S. data allayed fears of a renewed recession and while the euro zone edged closer to a resolution of its debt crisis.

The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.4 percent on Monday after hitting a five-week high on Friday following better-than-expected U.S. non-farm payroll data.

Japan's Nikkei average .N225 closed 1 percent higher.

After nearly falling into bear-market territory, U.S. stocks on Friday finished the week higher, building gains on encouraging jobs data and hopes that Europe is dealing with its debt crisis.

The Dow Jones industrial average .DJI was down 20.21 points, or 0.18 percent, at 11,103.12. The Standard & Poor's 500 Index .SPX was down 9.51 points, or 0.82 percent, at 1,155.46. The Nasdaq Composite Index .IXIC was down 27.47 points, or 1.10 percent, at 2,479.35.

(Reporting by Atul Prakash; Editing by Greg Mahlich)

Commodities were mostly stronger, helped by optimism on action in Europe and better-than-expected U.S. jobs data on Friday that eased fears of renewed recession in the world's biggest economy.

"The Europeans would now seem to be singing from the same hymn book and while some form of solution to the crisis is still a ways off, it now at least seems plausible," said Cameron Peacock, market analyst at IG Markets.

Euro STOXX 50 index futures rose 1 percent. Futures for Germany's DAX and France's CAC-40 also gained around 1 percent, while financial spreadbetters in London called the FTSE 100 .FTSE to open up as much as 0.8 percent. .EU .L

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent, while Tokyo markets were closed for a public holiday.

Australian .AXJO and South Korean .KS11 shares gained, but Hong Kong stocks .HSI fell 0.3 percent, hit by declines for financials and some property developers while Shanghai's main index .SSEC lost 0.4 percent. .AX .KS .HK .SS

Fears of a possible "hard landing" in the world's second-largest economy have roiled Hong Kong and mainland markets over the past couple of months, hurting banking, property and resources-related shares the most, although some players now see a buying opportunity.

"Chinese stocks are pricing in negative earnings growth to perpetuity," Citi analysts said in a note on Monday. "From these levels, markets have risen in nine out of ten cycles. Increasingly, thoughts need to turn toward what to buy rather than sell."

VOLATILE MARKETS

European policymakers have been under pressure from volatile financial markets to get to grips with the euro zone crisis, which many fear is heading inexorably toward a default by Greece -- and perhaps others -- that could unleash turmoil in the banking system.

Underlining the urgency of finding a fix, stricken Franco-Belgian lender Dexia (DEXI.BR) agreed early on Monday the nationalization of its Belgian banking division, the first victim of the two-year-old crisis.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks in Berlin on Sunday that their goal was to come up with a sustainable answer for Greece's woes, agree how to recapitalize European banks and present a plan for accelerating economic coordination in the euro zone by a G20 summit in Cannes on November 3-4.

The euro rose around 0.8 percent to $1.3475, from $1.3375 on Friday, when it had come under pressure following ratings downgrades of Italy and Spain.

The downgrade had also hit U.S. share markets, with the S&P 500 .SPX ending Friday down 0.8 percent. S&P 500 futures were up 1.1 percent on Monday, pointing to a firmer start on Wall Street. .N

Despite the euro's gains, many market players remained cautious about the outlook for the single currency, noting that Europe's leaders have often fallen short in past attempts to deal with the debt crisis.

"The positive response could simply reflect the fact that positioning is now more balanced following earlier risk reduction," Todd Elmer, currency strategist at Citi in Singapore, said in a research note.

TIGHTENING OF SPREADS

Hopes for progress in Europe helped improve sentiment in credit markets, with a modest tightening of spreads measured by iTraxx's Asia ex-Japan investment grade corporate index.

Oil firmed, building on Friday's gains on the back of U.S. payrolls data showing employers added more jobs last month than analysts expected, which eased fears of renewed recession in the world's biggest consumer.

Brent crude rose 0.2 percent to $106.07 a barrel and U.S. crude gained 0.6 percent to $83.50.

But copper fell 0.8 percent to around $7,310 a tonne, giving up some of the gains from last week's bounce that saw it post its biggest weekly gain in six months.

Gold, which in recent weeks has switched from a negative to a positive correlation with riskier assets such as industrial commodities and stocks as safe haven investors turned instead to the dollar, rose 0.8 percent to around $1,650 an ounce.

(Additional reporting by Jon Hopkins in London and Masayuki Kitano in Singapore; Editing by Richard Borsuk)