(Reuters) - World stocks gained and Wall Street looked set to rise on Tuesday despite increasing concerns in Europe about the state of some euro zone debt. The renewed concerns about peripheral euro zone economies weighed on the euro, which hit its lowest in more than a week versus the dollar before recovering to sit flat at $1.3928. Some players also closed long positions against the dollar ahead of year-end book-closing. Jitters about potential default or restructuring in Ireland, Portugal and Spain were evident. The cost of protecting Portuguese government debt against default rose to a record high, with five-year credit default swaps increasing by 15 basis points since Monday's New York close to 480 bps. But European shares shrugged off concerns and climbed to new two year highs, up almost three-quarters of a percent. The MSCI all-country world equity index rose 0.29 percent. Emerging market stocks were up close to 0.2 percent. "You've had the best of both worlds in equity markets. You've had good data, particularly in jobs, earnings growth and the Fed stimulus has brought bond yields down," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin. "The background is right for markets to break above the highs." G20 AHEAD U.S. crude oil gained 44 cents to $87.53 a barrel. German government bond prices rose with funding and default concerns pushing peripheral euro zone yield spreads wider. Investors were also watching this week's meeting of Group of 20 leaders in South Korea, pitched as a chance to prevent a currency row escalating into a rush to protectionism that could imperil the global recovery. There is little sign of consensus and the meeting has been overshadowed by disagreements over the Fed's quantitative easing policy. Gold extended earlier gains in European trade, hitting $1,414.80 an ounce with buying fuelled by inflation concerns and currency market uncertainty. Adding to the market's cautious tone, officials at the U.S. Federal Reserve offered differing assessments of the central bank's $600 billion bond-buying programme announced last week. One argued it was an effective way to offset deflation risks and another warned it might need to be curbed to head-off inflationary pressures.

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