Dollar, US stocks gain; stocks elsewhere fall on mixed data

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks and the dollar rose on Thursday on data showing U.S. factory activity accelerated in February at its fastest pace in nearly four years, but surveys showing a soft patch in China and parts of Europe dragged on global equity markets.

Markit's preliminary U.S. Manufacturing Purchasing Managers Index rose to 56.7 in February, its highest level since May 2010, from a final reading for January of 53.7. A reading above 50 indicates expansion.

Wall Street has shrugged off tepid data, pinning recent signs of economic weakness to the impact of unusually cold weather this winter rather than a worsening economy.

"The manufacturing data is extremely positive, especially coming after a spate of bad news at a time when the (Federal Reserve) seems committed to slowing stimulus," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

Even so, Colas said the U.S. equity market's strength is somewhat surprising given weakness in overseas markets.

"It is good to see investors buying on dips, but I've also been hearing a lot more bearish chatter," Colas said.

Shares in Europe retreated from four-week highs on Chinese and southern European data, while a poor corporate earnings outlook hurt cyclical sectors such as mining and industrials.

But European markets trimmed losses in late trading on the U.S. factory report. News that the number of Americans filing new claims for unemployment benefits fell last week buoyed markets, as it pointed to steadily improving U.S. labor market conditions despite two straight months of weak hiring.

Markit's Composite Purchasing Managers' Index for the euro zone dipped in February, although it held just below January's 31-month high. The service sector in France shrank at its fastest pace in nine months.

MSCI's all-country world equity index , a measure of equity markets in 45 countries, was down 0.04 percent. Its emerging markets index <.MSCIEF> was down 0.91 percent, while the FTSEurofirst 300 index of leading European shares closed down 0.10 percent to 1,337.34.

Stocks on Wall Street were higher. The Dow Jones industrial average rose 114.53 points, or 0.71 percent, to 16,155.09. The S&P 500 gained 12.57 points, or 0.69 percent, to 1,841.32 and the Nasdaq Composite added 28.933 points, or 0.68 percent, to 4,266.887.

Wal-Mart Stores Inc , the world's biggest retailer, was the Dow's biggest decliner, falling 1.7 percent to $73.58 after the company reported a drop in U.S. same-store sales and gave an earnings outlook that was below expectations.

Shares of Tesla Motors Inc hit an all-time high of $215.21 a day after it reported fourth-quarter results that topped expectations and said deliveries of its luxury Model S electric sedan would surge more than 55 percent this year. Shares were up 9.2 percent at $211.46.

Social networking giant Facebook Inc said late Wednesday it would buy mobile-messaging startup WhatsApp for $16 billion in cash and stock, plus an additional $3 billion worth of restricted stock units to WhatsApp's founders. Facebook shares rose 1.6 percent to $69.15 in heavy trading.

The dollar strengthened on the relatively strong U.S. data and after euro zone business surveys pointed to a sluggish recovery and a fragile outlook, which hurt the euro.

The dollar index rose 0.17 percent to 80.282, while against the Japanese yen the dollar traded near break-even at 102.31 yen.

The euro fell as low as $1.3688, pulling away further from a seven-week high of $1.37735 struck on Wednesday. It last traded down 0.09 percent at $1.3719.

"The U.S. economic data this morning definitely benefited the dollar across the board," said Blake Jespersen, managing director of foreign exchange at BMO Capital Markets in Toronto.

Treasuries prices fell as the mostly positive U.S. economic data met expectations.

The 10-year U.S. Treasury note fell 6/32 in price to yield 2.7554 percent.

Spanish bond yields bounced off eight-year lows even as another plump debt sale helped Madrid complete about a quarter of its 2014 debt program just as uncertainty over the euro zone growth outlook resurfaced.

Spanish 10-year yields rose 48 basis points to 3.611 percent.

German 10-year Bund yields, the benchmark for euro zone borrowing costs, were up 32 basis points at 1.694 percent.

Bund futures fell 46 ticks to settle at 143.45.

Brent crude slipped towards $110 a barrel after data pointed to slower growth in China, the world's second-largest oil consumer.

Brent eased 17 cents to settle at $110.30 a barrel. U.S. crude edged down 39 cents to settle at $102.92.

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GRAPHICS

U.S. jobless claims: http://link.reuters.com/xew34t

U.S. inflation: http://link.reuters.com/guq93t

Northeast manufacturing: http://link.reuters.com/dyq93t

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(Reporting by Herbert Lash; additional reporting by Francesco Canepa and Nigel Stephenson in London; Editing by Leslie Adler, Chris Reese and Chizu Nomiyama)