By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) - World shares rallied to their highest since February and the euro hit its strongest in 17 months on Tuesday after European Union leaders sealed a 750 billion-euro ($857 billion) recovery fund to revive regional economies ravaged by the coronavirus.

The agreement after five days of haggling drove down the risk premium on European assets and pushed gold to $1,840.01 an ounce, the highest in almost nine years. The precious metal got an extra boost from a weaker dollar and expectations of more U.S. stimulus.

The willingness to raise billions of euros in capital markets on behalf of all 27 EU states was an unprecedented act of solidarity in almost seven decades of European integration.

EU summit chairman Charles Michel presented the final plan as a "pivotal" moment to dispel doubts about the bloc's future.

The risk of a European break-up receded further and regional growth should be supported over the medium term by the recovery fund, Esty Dwek, head of global market strategy at Natixis Investment Managers, told investors.

Germany's DAX index entered positive territory for the year and the euro gained 0.42% to $1.1492 after briefly touching $1.1494, its highest since late January 2019.

Europe's broad FTSEurofirst 300 index rose 0.29% and MSCI's benchmark for global equity markets advanced 0.88% to highs last seen in February, when markets crashed on coronavirus fears.

"It's a significant step towards a more integrated and united Europe, which should boost the region's appeal to global investors and facilitate its re-rating," said Barclays' head of European equity strategy Emmanuel Cau.

Hopes that vaccines might be ready by the end of the year also supported the risk-on sentiment and helped push Italian government bond yields to their lowest since early March. Italy will be a main beneficiary of the fund, as will Spain, Greece, Portugal, Poland and Hungary, whose government bonds also rallied.

On Wall Street, the Dow Jones Industrial Average rose 1.2% and the S&P 500 added 0.61% after regaining positive territory Monday for the year for the first time since June 8. The Nasdaq Composite dropped 0.36%.

Asian shares overnight followed a tech-led rally on Wall Street that pushed the Nasdaq to its seventh closing high this month. The Sydney stock market clocked its best day in over a month with a 2.6% jump.

SHOT IN THE ARM

The main all-world equity indexes now have rebounded 45% off their March lows, boosted mainly by the record levels of stimulus announced by governments and central banks to cushion the impact of COVID-19 and its ensuing lockdowns.