* Global stocks rally as China, data revive recovery hopes
* Oil edges higher on economic recovery optimism
* Bonds rise as weak labor data spurs safe-haven buying
* Dollar, yen fall as data erode safe-haven demand
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 20 (Reuters) - Global stocks rallied and oil
prices edged higher on Thursday after an equity rebound in
China, some solid corporate results, and a bright spot in mixed
U.S. economic data all helped to reassure investors about the
recovery outlook.
Both the U.S. dollar and yen edged lower in thin trade as
gains in global stock markets and upbeat U.S. regional
manufacturing data eroded the safe-haven demand for the two
currencies.
But yields on U.S. Treasury debt mostly fell in choppy
trade as weak U.S. labor market data offset the surprise rise
in mid-Atlantic factory activity, renewing doubts about how
strong or sustained any U.S. economic rebound might be.
Crude prices rose slightly to near a seven-week high as
optimism over the U.S. economy and signs of rising fuel demand
outweighed the increase in new U.S. jobless claims.
Global sentiment improved after Chinese stocks <>
jumped 4.5 percent in their second-biggest daily percentage
gain this year, easing concerns about an almost 20 percent
slide in China's equity markets over the past two weeks.
"Investor sentiment appears to be oscillating between risk
aversion and relief on a session-by-session basis," said
Sreekala Kochugovindan, a strategist at Barclays Capital.
"However, the past month has been characterized by
declining volumes typical of the summer holiday season. History
suggests that trends established during periods of low trading
volumes have swiftly petered out once volumes picked up."
World stocks as measured by MSCI <.MIWD00000PUS> were up
1.4 percent. U.S. stocks rose for a third straight session
after the S&P 500 and Nasdaq suffered their worst day in about
seven weeks on Monday.
Financial stocks contributed the most to gains in U.S.
stocks. Citigroup <C.N>, the most active stock on the New York
Stock Exchange, rose 8.5 percent after an analyst said some
investors bet the share price will triple in three years.
AIG Inc <AIG.N> surged 21 percent to $32.30 after newly
appointed Chief Executive Robert Benmosche told Bloomberg the
bailed-out insurer may be able to repay its federal debts and
boost value for shareholders. []
"Just the fact that the more-important jobless claims were
overshadowed by the manufacturing data and rebound overseas
shows how much optimism there is in the market now," said Dan
Faretta, a senior market strategist at Lind-Waldock in
Chicago.
The Dow Jones industrial average <> closed up 70.89
points, or 0.76 percent, at 9,350.05. The Standard & Poor's 500
Index <.SPX> was up 10.91 points, or 1.09 percent, at 1,007.37.
The Nasdaq Composite Index <> was up 19.98 points, or 1.01
percent, at 1,989.22.
U.S. crude for September delivery <CLc1>, which expired at
Thursday's close, settled 12 cents higher at $72.54 a barrel.
Crude prices earlier rose to $72.88, the highest level since
June 30. October Brent futures <LCOc1> settled down $1.26 a
barrel at $73.33.
Oil markets have been tracking stocks and the U.S. dollar,
as well as broad economic indicators, for signs the recession
may end, which could foreshadow rebounding fuel demand.
Treasuries gains were mostly modest, with shorter maturity
notes unchanged.
"The mixed news kind of leaves (Treasuries) paralyzed,"
said Kim Rupert, managing director of global fixed income
analysis at Action Economics in San Francisco.
The benchmark 10-year note <US10YT=RR> was trading up 8/32
in price to yield 3.42 percent, near its lowest yield levels in
more than a month.
Britain's leading share index advanced in a broad-based
rally, and European shares closed higher as construction stocks
gained after Holcim <HOLN.VX> results pleased investors.
The FTSE 100 <> rose 1.4 percent to 4,756.58, while
the pan-European FTSEurofirst 300 <> index of top shares
also closed 1.4 percent higher at 944.94 points.
Gold futures ended lower amid light trading as bullion
investors focused on beaten-down gold jewelry demand, but
economic uncertainties also provided underlying support.
U.S. December gold futures <GCZ9> settled down $3.10 at
$941.70 an ounce in New York.
The Chinese snap-back boosted Asian stocks. Japan's Nikkei
average <> ended 1.8 percent higher, while the MSCI
benchmark of Asia-Pacific shares outside Japan <.MIAPJ0000PUS>
gained 1.3 percent.
(Reporting by Edward Krudy, Wanfeng Zhou, Joshua Schneyerand
Chris Reese in New York; Joanne Frearson and Ian Chua in
London; writing by Herbert Lash; Editing by Leslie Adler)
