* MSCI world equity index up 2.2 percent
* European, U.S. shares rally on bargain hunting
* Oil rises with equities
(Updates with U.S. midday trading)
By Al Yoon
NEW YORK, July 6 (Reuters) - World stocks posted their
biggest gains in a month on Tuesday after recent drubbings
pushed shares to attractive levels, while the euro rose as
investors waded back into risky assets.
The price of crude oil rose with the gains in equities and
helped by the weaker dollar after five sessions of declines.
Gold prices eased with the decline in risk aversion.
Stocks maintained their luster after the Institute for
Supply Management, a U.S. business group, said its index of
non-manufacturing activity grew in June for a sixth straight
month, though the pace of expansion was its slowest since
February.
MSCI's all-country world stock index <.MIWD00000PUS> jumped
2.2 percent, after last week plumbing its lowest point since
May 25.
"The market had got down to quite an oversold level," said
Colin McLean, managing director at fund manager SVM in
Edinburgh. "Individual stocks are down at support levels in
terms of moving averages, and could bounce a bit."
"The fall has been a bit indiscriminate over the past few
weeks," he added.
The benchmark Standard & Poor's 500 fell every day last
week and is down 8.3 percent since December, with investors
concerned some countries could suffer a double-dip recession.
Signs of weakness in the labor and housing markets as well as a
potential slowdown in manufacturing have sparked worries.
But analysts on Tuesday said the data from the Institute
for Supply Management on the U.S. service sector, which
dominates the U.S. economy, did not suggest a double-dip
recession was on the horizon.
In New York, the Dow Jones industrial average <> rose
129.27 points, or 1.33 percent, to 9,815.75. The S&P <.SPX>
gained 14.77 points, or 1.44 percent, to 1,037.35, and the
Nasdaq Composite Index <> climbed 31.30 points, or 1.50
percent, to 2,123.09.
U.S. equity markets also advanced in anticipation of a $22
billion initial public offering by the Agricultural Bank of
China. The IPO, which could set an all-time record, is seen as
a key test of investor sentiment, compromised in recent weeks
by persistent fears of a stalling global economy.
Comments from a member of the European Central Bank
Governing Council, Christian Noyer, relieved concerns about the
health of French banks. Noyer said the sector is likely to pass
Europe-wide stress tests later this month. His comments
followed similar remarks from the French economy minister. For
details, see []
U.S. and European banking shares were higher on Tuesday.
Bank of America Corp <BAC.N> shares gained 2.5 percent at
$14.18 and the KBW bank index <.BKX> rose 2.3 percent.
Financial stocks were the best-performing sector on the S&P
500.
The FTSEurofirst 300 <> closed up 2.6 percent at
991.23 points, bouncing back from six-week closing lows.
French banks Societe Generale <SOGN.PA>, Credit Agricole
<CAGR.PA> and BNP Paribas <BNPP.PA> jumped 4.2 to 6.3 percent.
Mining stocks were also in demand. The STOXX Europe 600
Basic Materials <.SXPP> rose 5.1 percent after slipping on
Monday. The sector has been recently hammered by worries over
the pace of the global economy.
Shares of BP <BP.L> rose 3.7 percent as the company said it
had no plans to issue stock and talk persisted of sovereign
wealth fund interest in the British oil major.
"Markets are a bit oversold. The decline has been quite
strong," said Joost de Graaf, senior portfolio manager at
Kempen Capital Management in The Netherlands. "There are hopes
that second-quarter earnings will be OK and will lift some of
the negative atmosphere."
The MSCI world index is still down nearly 10 percent for
the year. World stocks weakened Monday. U.S. markets were
closed on Monday for the Independence Day holiday.
Japan's Nikkei <> closed up nearly 1 percent, coming
off a seven-week low. Emerging market stocks <.MSCIEF> jumped 2
percent.
DOLLAR HIT
The more risk-friendly mood hit the dollar, which fell
nearly 1 percent against a basket of major trading partner
currencies <.DXY>.
The Australian dollar rallied after the Reserve Bank of
Australia offered an upbeat assessment of the global economy,
spurring appetite for high-yielding currencies, while rising
risk demand also boosted the euro.
Australia's central bank held its key interest rate at 4.5
percent, saying the policy was appropriate, given caution in
global markets, and said it remained optimistic about the
outlook for Asia and the Australian economy. []
Relief over the central bank's position boosted global risk
appetite, prompting an unwinding of bearish positions in the
euro put on amid worries of unsustainable European sovereign
debts.
"There's been a gradual return of risk appetite," said
Ulrich Leuchtmann, currency strategist at Commerzbank in
Frankfurt.
The euro <EUR=> rose 0.91 percent at $1.2653. Against the
Japanese yen, the dollar <JPY=> declined about a third of a
percent to 87.46 yen.
But while investors in most markets signaled rising risk
appetite, U.S. Treasury debt prices rose as traders added to
bets that the Federal Reserve will cling to an easy monetary
policy into the second half of 2011 in a bid to avert a
double-dip recession.
In the wake of Friday's U.S. jobs report showing a payroll
loss for the first time this year, safe-haven appetite for
bonds persisted despite the stocks rebound on Wall Street.
Yields on benchmark 10-year U.S. Treasury notes declined
0.01 percentage point to 2.97 percent.
In commodities, U.S. light sweet crude oil <CLc1> rose
$1.29, or 1.79 percent, to $73.43 per barrel, and spot gold
<XAU=> fell $12.35, or 1.02 percent, to $1195.60 an ounce.
(Additional reporting by Richard Leong, Edward Krudy, Rodrigo
Campos and Vivianne Rodrigues in New York and Brian Gorman and
Naomi Tajitsu in London; Editing by Leslie Adler)
