* Locally traded bond prices jump 1.8 percent on average
* Argentina's MerVal .MERV index surges 7.16 percent
* Risk spreads 11EMJ narrow 54 basis points (Updates with closing bond prices, adds stocks)
BUENOS AIRES, May 10 (Reuters) - Argentine bonds and stocks surged on Monday as an estimated $1 trillion rescue package for struggling European countries eased global risk aversion and boosted the outlook for Argentina's ongoing debt swap.
Argentina's country risk spreads narrowed 54 basis points to 724 basis points over comparable U.S. Treasuries, after having hit their highest level since February last week, when widespread fears about possible European defaults shook global markets.
Ask prices for locally traded Argentine bonds closed up an average of 1.8 percent on Monday, after having risen as much as 3 percent earlier in the session.
The dollar-denominated Bonar 2017 bond ARBONAR17D=RASL saw the biggest percentage increase in its ask price, surging 5.28 percent to 79.80.
A brighter outlook for riskier assets, thanks to the European rescue package, could boost Argentine efforts to swap $18.3 billion in defaulted debt and raise another $1 billion in the government's first global debt sale in eight years.
"This allows confidence and greater calm over the result of the debt swap," said Hernan Labrone, an analyst at Buenos Aires-based consulting firm Fenix Compania Financiera.
"Forceful measures were needed to calm the markets, and the rescue package let the markets change their perspective so emerging markets could rise after a painful week," he added.
The benchmark MerVal .MERV stock index soared 7.16 percent to end at 2,314.94 points, led by banking stocks including Grupo Financiero Galicia (GFG.BA), which jumped 14 percent to 2.35 pesos per share.
Argentine banks are major holders of government bonds, meaning their shares are especially sensitive to debt prices.
Stock indexes in the United States, the world's largest economy, also rallied on Monday, as investors returned to equities.
The emergency European Union package to stabilize the euro -- set after marathon weekend meetings among EU leaders -- rallied markets on Monday, reversing some of last week's battering. [ID:nSGE6490HH]
Fears of defaults among fiscally-troubled euro zone countries, including Greece, Portugal and Spain, have roiled markets in recent weeks, with investors punishing riskier assets around the world in a flight to safe havens. (Reporting by Walter Bianchi and Jorge Otaola, Writing by Luciana Lopez)