* Global stocks gain on Portuguese bond sale, sentiment
* Euro rises vs dollar after good demand for Portugal debt
* Brent oil hits 27-month high above $98 on demand outlook
* Strong Portuguese auction dampens demand for Treasuries (Updates with close of European markets)
By Herbert Lash
NEW YORK, Jan 12 (Reuters) - Global stocks and the euro rallied on Wednesday after healthy demand for Portugal's debt sale eased concern over the latest spasm of Europe's lingering debt crisis and boosted sentiment among investors.
European stocks hit a 28-month closing high, lifted by speculation the European Union will bolster the region's rescue fund, and government bond prices dropped after the Portuguese bond auction reduced the safe-haven appeal of debt and gold.
The average yield on Portugal's 10-year bond fell compared to a previous sale in November, confounding expectations that yields would top 7 percent for the first time in the history of the euro zone.
The euro extended gains versus the U.S. dollar, with traders citing options-related demand pulling it toward a session high of $1.3113. For details see [ID:nN12148673]
That gain put the euro above its 200-day moving average, which Reuters data put at $1.3070, a level that would be a first step toward improved euro sentiment, traders said.
World stocks as measured by MSCI's all-country world index .MIWD00000PUS advanced 1.4 percent, while it's emerging markets index .MSCIEF gained 1.7 percent.
In Europe, the FTSEurofirst 300 .FTEU3 index of top European shares finished 1.5 percent higher at 1,163.94 points, the highest close since September 2008, with Spanish banks leading a relief rally.
"Encouraging news that the EU Commission could use the region's rescue fund to back sovereign debt issues is helping bring down risk premiums and this is directly benefiting the banks," said Oscar Moreno, fund manager at Renta4 in Madrid.
U.S. stocks also gained, helped by signs of strength in the U.S. banking sector, but Europe played a key role.
The European debt crisis and future strength in U.S. banks "are probably the two big stories" for equities, said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
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