World stocks advance on strong data, earnings

By Atul Prakash

LONDON (Reuters) - Global stocks climbed on Monday, with strong U.S. data and encouraging third-quarter earnings easing concerns about the pace of global economic recovery and raising appetite for riskier assets.

The MSCI world equity index, which tracks shares in 45 countries, was up 0.3 percent by 0821 GMT.

MSCI's broadest index of Asia-Pacific shares outside Japan surged 1.2 percent overnight as an upbeat survey of U.S. consumer sentiment on Friday brought some calm to markets after a week of turbulence.

The pan-European FTSEurofirst 300 index fell 0.3 percent, however, as a profit warning by technology company SAP hit shares in the sector.

The Thomson Reuters/University of Michigan index of consumer sentiment rose to its highest in more than seven years in early October, beating expectations. New housing starts were also surprisingly strong last month, suggesting U.S. economic growth remained solid.

"Calm returns after last week's roller-coaster ride," Saxo Bank trader Andrea Tueni said. "U.S. macro data is reassuring, the earnings season has been quite good so far, and we're getting positive news such as Japan's big pension fund boosting its exposure to equities.

"Sentiment remains fragile, but we get the impression that stocks have hit a low."

Japan's $1.2 trillion Government Pension Investment Fund -- the world's biggest, with a war chest bigger than the annual output of Mexico's economy -- is likely to raise its allocation for domestic stocks to about 25 percent, people familiar with the process said on Saturday.

The stock market also got some support from encouraging U.S. earnings reports. Out of the 81 S&P 500 component companies that have reported third-quarter results, 64.2 percent have beaten expectations, a rate slightly below the average over the past four quarters but better than the past 20 years.

On Wall Street, all major stock indexes rose more than 1 percent on Friday, while Japan's Nikkei surged 4 percent on Monday to post its biggest daily rise since June 2013 on upbeat U.S. data and as a weaker yen helped exporters.

The dollar rose against the safe-haven yen on the encouraging economic numbers and a pushing back of expectations on when U.S. interest rates will begin to rise. News that Japan's pension fund was also likely to boost its foreign asset holdings, spurring demand for foreign currencies, also helped.

"There are a number of factors providing some support for risk at the moment, but the big question is how long that lasts," said Ian Stannard, head of European currency strategy at Morgan Stanley in London, citing comments from several policymakers that have helped push back rate hike expectations.

Euro zone bond yields dipped as concerns about a slowdown in global growth eased. German 10-year Bund yields, which set the standard for euro zone borrowing costs, fell 1 basis point to 0.85 percent, while Spanish, Italian and most other yields were down 1-2 basis points on the day.

In commodities trading, Brent crude steadied, holding on to gains scored in the previous session that took it above $86 a barrel after U.S. data, with a cut in Saudi-Kuwait oil output providing further support.

(Additional reporting by Blaise Robinson in Paris, Jemima Kelly in London and Lisa Twaronite in Tokyo; Editing by Catherine Evans)