GLOBAL MARKETS-Oil gains on economic optimism, dollar hits low

                                
 * Government bonds jump as GDP data signal low inflation
                                
 * U.S. dollar hits 2009 low as risk appetite increases
                                
 * Oil prices jump nearly 4 percent on economic optimism
                                
 * U.S. stocks waver as worries about the consumer weigh
 (Updates with close of U.S. markets)
                                
 By Herbert Lash
                                
 NEW YORK, July 31 (Reuters) - Crude oil surged almost 4
percent on Friday while the U.S. dollar slid to its lowest for
the year after data showed the U.S. economy contracted less
than expected in the second quarter, boosting risk appetite.
                                
 U.S. government debt prices jumped on the perception that
inflation will remain tame as the U.S. economy gradually
emerges from the worst downturn in 70 years. For more see
[ID:nN31442719].
                                
 Copper and aluminum soared to multi-month highs as trading
in July ended with optimism about economic recovery, helping
metals markets post one of their best months since March.
[ID:nLV379320]
                                
 The Dow ended its best July since 1989, soaring 8.6 percent
during the month, while the S&P 500 rose 7.4 percent as the
benchmark notched its best gains for the month since 1997. The
S&P 500 has posted its best five-month streak since 1938 after
stocks began pulling out the bear market's lows in March.
                                
 But the mood on Wall Street was cautious as a government
report on U.S. gross domestic product showed that consumers
reined in spending during the second quarter, which may bode
ill for hopes of a speedy global recovery.
                                
 A steep drop in consumption spending fanned fears of a
sluggish recovery even as signs that the deepest U.S. recession
since the Depression of the 1930s appeared to be easing as GDP
fell at a less-than-expected 1.0 percent annual pace.
[ID:nN31416560].
                                
 A report from the National Association of Purchasing
Management-Chicago offset some of the worries triggered by the
GDP report after data showed business activity in the U.S.
Midwest improved more than expected in July. [ID:nN31422353]
                                
 "The GDP number came in better than expected but was masked
by a lot of government spending and the consumer pulled back,"
said Jack Ablin, chief investment officer at Harris Private
Bank in Chicago. "When you're fueling economic growth on
government spending, clearly that is not a sustainable
situation."
                                
 U.S. stocks closed near break-even, with the Dow and S&P
500 eking out gains and the technology-heavy Nasdaq falling
slightly.
                                
 The Dow Jones industrial average <.DJI> closed up 17.15
points, or 0.19 percent, at 9,171.61. The Standard & Poor's 500
Index <.SPX> added 0.73 points, or 0.07 percent, at 987.48. The
Nasdaq Composite Index <.IXIC> fell 5.80 points, or 0.29
percent, at 1,978.50.
                                
 The euro extended gains versus the dollar, which slid more
than 1 percent against a basket of currencies, pressured by
month-end flows and after data showed that business activity in
the U.S. Midwest improved more than expected in July.
                                
 The euro <EUR=> rose 1.3 percent on the day to $1.4253, its
biggest one-day gain in more than a month.
                                
 The dollar fell 0.9 percent against the yen to 94.71 <JPY=>
and the ICE Futures U.S. dollar index fell 1.3 percent to
78.291 <.DXY> after falling as low as 78.220, a 2009 low. The
index tracks a basket of six other major currencies.
                                
 Oil rebounded on the business activity news, settling above
$69 a barrel, and gold futures in New York launched a brief
rally after the dollar gave up new ground.
                                
 U.S. light crude <CLc1> traded up $2.51 to settle at $69.45
a barrel, reversing earlier losses. London Brent crude <LCOc1>
gained $1.59 to end at $71.70 a barrel.
                                
 The price on benchmark 10-year Treasury notes <US10YT=RR>
was up more than 1 point to yield 3.48 percent. The 30-year
bond <US30YT=RR> surged nearly 2 points to yield 4.30 percent.
                                
 European stocks closed lower at the end of a strong month
for equities worldwide, with weakness in oils and pharmas
offsetting strength in banks and miners. [ID:nLV371790]
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
fell 0.2 percent to close at 928.78.
                                
 Spot gold prices <XAU=> rose $19.00 to $952.30 an ounce.
                                
 Asian stocks were poised to set double-digit gains in July,
with the MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> up almost 12 percent for the month on bets the
region will lead the global economy out of recession.
                                
 The index rose 1.7 percent to an 11-month high while
Japan's Nikkei average <.N225> rose 1.89 percent to a 10-month
peak.
 (Reporting by Ellis Mnyandu, Matthew Robinson, Wanfeng Zhou
and Chris Reese in New York and Brian Gorman and Jon Hopkins in
London; Writing by Herbert Lash; Editing by James Dalgleish)