* Pan-European STOXX 600 index ends 1.2% higher
* Demand for safe-haven bonds falls back
* Norwegian Air up on stake sale in banking company
* Greene King shares jump on buyout offer (Adds details, comments, updates prices to close)
By Agamoni Ghosh
Aug 19 (Reuters) - European shares ended higher for a second straight session on Monday on signs that measures would be adopted to prop up growth in major economies, while bond yields rebounded amid improved global sentiment plagued by recession worries.
The pan-European STOXX 600 index, hammered since the start of August by worries of a possible global slowdown, ended 1.2% higher, with Frankfurt shares up 1.3%, recovering from last week's six-month low.
Friday's report that Germany's coalition government may ditch its balanced budget rule to take on new debt and launch stimulus continued to help sentiment. Finance Minister Olaf Scholz said the country possessed the fiscal strength to counter any future economic crisis "with full force."
"It's a continuation of what we saw on Friday, the hope that their government will step in to provide fiscal stimulus to boost growth in the economy," said Carsten Brzeski, chief economist, Germany at ING. "Because news like that is a game changer."
The moves from Berlin come on the back of stalled growth across Europe that has been led by a slowdown in the region's largest economy, with the U.S.-China trade war, Brexit uncertainty and Italy's political woes adding pressure.
Longer-term bond yields in the euro zone as well as the United States, whose slide below short-term rates last week set off alarm bells about a possible recession, were off their record low levels.
"Its like we had a big storm and now there is a dry period with some rays of sunshine which will encourage more risk-taking, but it is still a highly volatile market," said Brzeski.
China's central bank added to the stimulus cheer by unveiling interest rate reforms targeted at lowering corporate borrowing costs. The move comes after Beijing announced plans to spur private consumption to shore up growth last week.
All Europe's stock market sectors ended the session in the black. Oil stocks chalked up their biggest daily gain since January this year, benefiting from a rise in crude prices due to an attack on Saudi oil installations in Yemen.
Among individual stocks, Norwegian Air rose 4% after agreeing to sell its stake in Norwegian Finans Holding for 2.22 billion crowns ($247 million) in an attempt to boost the loss-making airline's finances.
Greene King shares jumped nearly 50% after a unit of CK Asset Holdings Ltd agreed to buy the British pub operator.
Investors will be watching for minutes from the latest policy meetings of both the U.S. Federal Reserve and the European Central Bank later this week, along with global PMI numbers, to further assess the health of the world economy. (Reporting by Agamoni Ghosh, Shreyashi Sanyal and Amy Caren Daniel in Bengaluru Editing by Arun Koyyur and David Holmes)