GLOBAL MARKETS-Stocks rally to start second half; bond yields rise

Tue Jul 1, 2014 4:29pm EDT

* S&P 500 hit record intraday high, Dow flirts with 17,000
    * Data show U.S., Chinese factory growth; euro zone data
weak
    * French banks help European stocks start H2 robustly
    * Benchmark U.S. bond yields rise from recent lows
    * Dollar edge up above 7-week low on forecasts of dovish Fed

 (Updates market action, add new analyst quote)
    By Richard Leong
    NEW YORK, July 1 (Reuters) - Stock markets around the world
rallied at the start of the second half of 2014 on Tuesday,
propelled by solid U.S. and Chinese economic data and the notion
that central banks will keep interest rates low for some time.
    The Standard & Poor's 500 index hit an intraday record high
at 1,978.58 points, while the Dow Jones Industrial average came
within two points of the 17,000 milestone. 
    Encouraging U.S. and Chinese factory figures pointed to
stabilization in the world's two biggest economies, while weaker
data on euro zone manufacturing and inflation supported the view
the European Central Bank might lower interest rates to help the
region's businesses and avert deflation. 
  
    "It seems things are clicking," said Jonathan Golub, chief
U.S. market strategist at RBC Capital Markets in New York.
    There was relief among euro zone banks after
France's largest, BNP Paribas, on Monday pleaded
guilty and agreed to pay almost $9 billion for violating U.S.
sanctions against Sudan and other countries. 
    The Dow and S&P 500 ended at record closing highs, with 
the Dow closing up 129.25 points or 0.77 percent at
16,955.85, and the S&P 500 finishing 13.06 points or 0.67
percent higher at 1,973.29. The Nasdaq Composite ended
up 50.473 points or 1.14 percent at 4,458.651.   
    Top European shares ended up 0.85 percent, while
Japan's Nikkei closed up 1.1 percent.  
    The MSCI world equity index, which tracks
shares in 45 nations, hit a record high of 431.98 before scaling
back at bit in late trading at 431.37, up 0.6 percent.    
    
    HOME ON THE RANGE
    While Wall Street stocks posted another quarter of gains as
of Monday, the dollar and U.S. government bond yields have been
rangebound as the U.S. Federal Reserve has shown no sign it will
raise interest rates anytime soon.
    Benchmark U.S. 10-year Treasuries yields, a gauge for the
U.S. dollar and global borrowing costs, traded at 2.57 percent
, up 5 basis points from Monday, which was still at
the low end of this year's trading range. 
    One big market bet for the first half was for a rise in the
dollar on the view the Fed is inching towards its first
post-crisis rate hike, but this predictions has fallen flat.    
 
    The dollar index fell to a seven-week low of 79.759
on Monday and was a tad above that at 79.814 on Tuesday. 
    Gold held steady at $1,328 an ounce as fighting in
Iraq and Ukraine fed safe-haven demand for the metal, keeping it
at a 2-1/2-month high.   
    Brent crude finished down 7 cents or 0.06 percent at
$112.29 a barrel. U.S. crude settled down 3 cents or 0.03
percent at $105.34 per barrel. 

 (Additional reporting by Angela Moon in New York; Marc Jones in
London; Hideyuki Sano in Tokyo; Editing by Louise Ireland, John
Stonestreet, Meredith Mazzilli and Chizu Nomiyama)