World shares, oil gain on U.S., European manufacturing data

By Herbert Lash

NEW YORK (Reuters) - Global equity markets and crude oil rose on Monday as investors snapped up riskier assets at the start of a new quarter after data showed U.S. manufacturing expanded in June, while Japanese and European data indicated stabilizing economies.

Wall Street opened higher, with stocks climbing more than 1 percent, after the Institute for Supply Management said its index of national factory activity rose to 50.9 in June from 49.0 in May, a touch above the expected 50.5 level.

Business surveys in Europe showed the euro zone's prolonged economic decline may have stabilized in June and even rebounded in some areas, while British manufacturing grew at its fastest pace in more than two years.

Investors brushed off signs of a slowdown in China, where the official purchasing managers' index showed factory growth stalling last month. A similar private survey offered a bleaker picture and showed manufacturing activity tumbled to a nine-month low.

"People saw ISM was stronger and slightly higher than consensus and decided to run with it," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Forrest said the reallocation of cash from bonds into stocks as the new quarter begins could be behind the strength the equity market showed even before the release of the U.S. data.

U.S. equities built on the strongest first half of any year since 1998 as concerns eased further that the Federal Reserve would soon reduce its stimulus program.

Gains this year have largely been driven by the Fed's bond-buying policy, which helped push major U.S. indexes to record highs before comments by Fed Chairman Ben Bernanke spurred uncertainty over when the U.S. central bank will end the policy.

MSCI's all-country world equity index rose 1.06 percent, as it bounced back from its first quarterly loss since the same period of 2012.

The Dow Jones industrial average was up 160.39 points, or 1.08 percent, at 15,069.99. The Standard & Poor's 500 Index was up 18.81 points, or 1.17 percent, at 1,625.09. The Nasdaq Composite Index was up 48.21 points, or 1.42 percent, at 3,451.46.

In Europe, the broad FTSEurofirst 300 of leading regional companies rose 0.99 percent to a provisional close of 1,163.58.

Crude oil rose amid a broad rally in commodities.

Brent crude gained 54 cents a barrel to $102.70. U.S. crude rose $1.00 to $97.56 a barrel.

Some in the market questioned the day's surge.

"Markets have been going back and forth, but it looks like a relief rally after everyone over-reacted to Bernanke's comments," said Uri Landesman, president of Platinum Partners in New York.

Markets are sensitive to U.S. data because it will shape the timetable for the Fed to taper its $85 billion a month in asset purchases, which have supported stocks, bonds and commodities worldwide.

"The news out of Europe was the first tangible proof of improving economic activity in the periphery economies and indicates that the region may be finally starting to turn toward growth as the summer progresses," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

The dollar fell against most currencies, while the yen dropped to its lowest in nearly four weeks versus the greenback as the better-than-expected economic data from Europe and Japan lifted risk sentiment.

The euro was up 0.42 percent at $1.3063, recovering after a dip last week to $1.2983, its lowest since early June.

The dollar was up 0.54 percent at 99.66 yen.

U.S. Treasuries prices erased most of the session's losses after the ISM manufacturing index's employment index slipped in June.

The benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 2.4914 percent.

USEFUL LINKS:

U.S. manufacturing: http://link.reuters.com/vef94t

North American PMIs: http://link.reuters.com/wyv58t

World Manufacturing PMIs: http://link.reuters.com/vuk44t

(Reporting by Herbert Lash; Additional reporting by Richard Hubbard in London; Editing by James Dalgleish and Dan Grebler)