U.S. data lifts global stocks; dollar slips vs euro

NEW YORK Mon Feb 1, 2010 4:51pm EST

A woman looks at an electronic board with stocks information at a brokerage house in Hefei, Anhui province January 12, 2010. REUTERS/Stringer

A woman looks at an electronic board with stocks information at a brokerage house in Hefei, Anhui province January 12, 2010.

Credit: Reuters/Stringer

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NEW YORK (Reuters) - World stocks rebounded on Monday, while U.S. Treasury bonds fell and the dollar slipped against the euro after data showed U.S. manufacturing at its strongest in 5-1/2 years in January.

The Institute for Supply Management's index of factory activity was the strongest since August 2004 and followed strong manufacturing data from China, Australia and the euro zone, whetting investors' appetite for risk. U.S. equities rose more than 1 percent.

The MSCI world equity index rose 0.94 percent after touching its weakest level since early November earlier in the day.

The Dow Jones industrial average .DJI ended up 1.17 percent at 10,185.53. Exxon Mobil (XOM.N), a Dow component, reporter stronger-than-expected fourth-quarter earnings.

The U.S. dollar fell against the euro but rose against the yen as investors bet global economic growth was picking up. The euro rose 0.52 percent at $1.3934. Against the yen, the dollar gained 0.39 percent at 90.65 yen.

"A lot of this manufacturing surge that we are seeing is really the result of business needing to replenish inventories that had fallen so dramatically during the recession," said Stephen Gallagher, chief U.S. economist at Societe Generale in New York.

"It is really telling me that the first half of 2010 is going to be supported by the restocking," Gallagher added.

Crude oil prices rose 2.11 percent to $74.43 a barrel, boosted by the dollar's weakness and optimism about economic recovery.

U.S. BONDS OFF

Markets showed limited reaction to U.S. President Barack Obama's budget for fiscal 2011, which forecast a record deficit of $1.56 trillion in 2010.

Analysts said the figure was in line with expectations, but the report was short on details on how to increase revenues while curbing federal projects, including space missions.

U.S. Treasury prices fell on the fast rate of manufacturing growth as it rekindled worries about inflation and implied lower demand for safe-haven bonds. U.S. bond investors were less fearful that Greece would default on its debt.

Inflation concerns pushed prices on the 30-year Treasury bond to end down 41/32 after hitting a session low of 96-23/32. Its yield, which moves inversely to price, was 4.57 percent, up from 4.49 percent on Friday.

Benchmark 10-year notes fell 19/32 in price to yield 3.66 percent, up from Friday's closing 3.59 percent.

A deficit-cutting plan in Greece is ambitious but achievable, the EU economic and monetary affairs commissioner said on Monday.

European shares closed higher, with the FTSEurofirst 300 .FTEU3 index ending 0.6 percent higher at 1,018.

(Reporting by Reuters bureaux worldwide; Editing by Kenneth Barry)

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