GLOBAL MARKETS-Euro rebounds, stocks surge on Greek loan accord

(Adds missing 'n' in initial use of McKnight's name in paragraph 14, error first occurred in Wrapup 7)

* Dow, S&P 500, Germany's DAX set intraday records

* Euro pares losses to edge higher on accord

* Greek yields down ahead of debt deal

* Oil steadies above $60, U.S. rig count falls

By Herbert Lash

NEW YORK, Feb 20 (Reuters) - The euro rebounded against the dollar and global equity markets surged to record highs on Friday after Greece and euro zone finance ministers reached an agreement to extend a Greek financial rescue package for four months.

Investors had awaited a deal all week. But after preparatory talks involving the Greek and German ministers, as well as the managing director of the International Monetary Fund, appeared to be on track it was enough to push the Dow Jones industrial average and benchmark S&P 500 to new intraday highs.

The euro rebounded and the benchmark 10-year U.S. Treasury note retreated. Before the deal was announced, Germany's DAX index hit a record intraday high and Britain's top share index closed within 0.5 percent of a 15-year high.

Europe's leading equities index closed at seven-year highs in anticipation a deal would be reached.

"The rally is as much as anything a relief rally. If this does come to fruition, which seems to be the direction at the moment, it's one less worry that can be checked off," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The euro pared losses against the U.S. dollar to trade up 0.33 percent at $1.1403. Against the yen, the dollar pared losses to trade up 0.03 percent at 118.98.

MSCI (NYSE: MSCI - news) 's all-country world equity index rose 0.32 percent, while the European FTSEurofirst 300 index of top regional shares closed up 0.33 percent at 1,525.21.

In late trade on Wall Street, the Dow Jones industrial average was up 138.56 points, or 0.77 percent, at 18,124.33. The Standard & Poor's 500 Index was up 10.71 points, or 0.51 percent, at 2,108.16. The Nasdaq Composite Index was up 27.23 points, or 0.55 percent, at 4,951.93.

Greek bond yields pushed lower on hopes euro zone finance ministers would reach a deal.

Greek three-year yields dropped 63 basis points to 16.497 percent, pulling further away from last week's highs above 22 percent.

The Greek stalemate overshadowed data pointing to growth in Germany and France, which helped push European shares higher.

Halfway into the European earnings season, results have been strong. Fourth-quarter earnings are expected to grow 19.5 percent, which would be the best quarter in 3-1/2 years.

The FTSEurofirst 300 has risen 11 percent so far this year, outpacing a 1.9 percent gain in the S&P 500, helped by the ECB's plans to buy government bonds to boost the economy.

The gap (NYSE: GPS - news) between the yield of 10-year U.S. Treasuries and the earnings yield of the S&P 500 is at its widest in 40 years, noted Alex McKnight, a portfolio manager at GAM in New York.

"We see global yields as ridiculously suppressed, be it the U.S, be it Europe," McKnight said. "This is the level (at which) I may not be piling into equities right here, but I don't think they're bad value" relative to government bonds, high-yield or investment grade credit, he said.

U.S. Treasury debt prices had risen in early trading, boosted by safe-haven buying as investors worried about the likelihood of a Greek deal. They later reversed course. Benchmark 10-year Treasuries fell 2/32 in price to yield 2.1187 percent.

Brent crude oil steadied above $60 a barrel as news of a falling U.S. rig count outweighed concerns about oversupply.

Brent crude futures for April settled up 1 cent at $60.22 a barrel. U.S. crude for March delivery fell 82 cents to settle at $50.34. The contract expires on Friday. (Reporting by Herbert Lash; Additional reporting by Emelia Sithole-Matharise, Alastair Smout and Jemima Kelly; Editing by Dan Grebler,; Editing by Chizu Nomiyama)