The euro recovered on Tuesday after Greece successfully returned to capital markets for the first time since late April, while global equities advanced after Alcoa delivered a strong start to the earnings season.

Athens sold 1.625 billion euros ($2 billion) of six-month Treasury bills, passing its first borrowing test since securing a 110 billion euro EU/IMF emergency funding deal in May.

We were expecting a good result, and it's good for Greece and the euro, but Greece has a long way to travel, as its economic challenges are pretty severe, said Paul Robinson, FX strategist at Barclays Capital.

It's going to take years for Greece to figure this out, not just one auction, he said.

The euro recouped earlier losses against the dollar to trade steady at $1.2583, shrugging off Moody's Investors Service's two-notch downgrade of Portugal's debt rating.

The impact of the downgrade to A1 was limited because rival agency Standard & Poor's already rates Portugal a further two notches lower, at A-minus.

The dollar was down 0.3 percent at 88.41 yen. Against a basket of major currencies, the greenback steadied.

Bund futures extended losses after the Greek auction results. The September contract was last 37 ticks lower at 128.87.

However, Portugal's borrowing costs rose after the Moody's downgrade. The Portuguese yield spread over Bunds widened to 291 basis points, around 5 bps wider compared with Monday's settlement close.

STOCKS HIGHER

World stocks measured by the MSCI All-Country World Index <.MIWD00000PUS> rose 0.4 percent, helped by aluminum group Alcoa's stronger-than-expected quarterly earnings.

Alcoa's results boded well for the U.S. earnings season and offset concerns over China's growth after Beijing said it has no plans to relax tougher property measures any time soon.

Beijing said it would continue to rein in speculation in the country's booming property sector, dampening talk that it was relaxing credit controls.

The comments weighed on Chinese stocks <.SSEC> as well as the Australian dollar, which is seen as a proxy of Chinese growth.

In Europe, the FTSEurofirst 300 <.FTEU3> index gained 1.6 percent, also helped by rises in shares of oil major BP .

What we have generally seen over the last few days are traders betting that the U.S. earning season will be a fruitful one and are therefore cherry picking stocks that to them may look cheap, said Giles Watts, head of equities at City Index in London.

U.S. stock index futures rose 0.5 to 0.7 percent, indicating a firmer start for Wall Street.

The MSCI All-Country World Index gained more than 5 percent last week to post its best weekly rise in a year, though it is still down 5.9 percent in 2010.

It carried a one-year forward price-to-earnings ratio of 11.13, falling to a level last seen in March 2009 and compared with its 10-year average of 15.41, according to Thomson Reuters DataStream. Among the major U.S. companies to report results this week include Intel , JPMorgan Chase , Citigroup , Bank of America and General Electric .

(Additional reporting by Neal Armstrong, Will James and Jon Hopkins; Editing by Ruth Pitchford)

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