Stocks gain on recovery hopes

By Herbert Lash

NEW YORK (Reuters) - Global stocks rallied on Monday, lifted by better-than-expected sentiment in Europe in June and renewed hopes of recovery, while the U.S. dollar rose after China ruled out any sudden change in its foreign reserve policy.

Oil prices topped $71 a barrel, supported by rising equity markets around the world and after fresh rebel attacks on oil installations in Nigeria.

Government debt on both sides of the Atlantic rose on continued relief over the strong demand for the heavy doses of recent new debt. Benchmark yields on U.S. Treasuries slipped to their lowest level in a month.

Copper hit a two-week high as confidence grew that the global economy was healing, while gold slid toward $935 as the dollar gained on comments by Chinese officials at a meeting of central bankers in Basel, Switzerland over the weekend.

China's policy governing its $1.95 trillion in foreign reserves -- the bulk of which are U.S. Treasuries -- was stable and consistent with no "sudden changes," the country's central bank governor Zhou Xiaochuan said, giving the dollar some respite.

"Today's tacit reaffirmation of the dollar standard is a sign of Chinese acknowledgment that for the time being the greenback remains the primary manner for settling global trade accounts," said Boris Schlossberg, director of currency research at GFT Forex in New York.

The dollar had come under pressure recently as debate intensified about the use of an alternative global currency to the greenback, with China's central bank renewing its call for a super-sovereign reserve currency last week.

The rise in crude oil also bolstered energy shares on both sides of the Atlantic, with Exxon Mobil Corp (XOM.N) gaining 1.9 percent, Royal Dutch Shell (RDSa.L) up 1.8 percent and Total (TOTF.PA) adding 2.5 percent.

Economic news also provided a boost to global equity markets, as euro zone economic sentiment improved more than expected in June, data showed, while Japanese industry output rose for the third month in a row.

A surge in Shanghai stocks .SSEC to a one-year closing high for the fourth straight session on signs of Chinese economic recovery also bolstered investor sentiment.

"On a very short-term basis, the American investor is taking comfort from international markets, which have had decent activity," said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

At 1 p.m., the Dow Jones industrial average .DJI was up 76.86 points, or 0.91 percent, at 8,515.25. The Standard & Poor's 500 Index .SPX was up 6.90 points, or 0.75 percent, at 925.80. The Nasdaq Composite Index .IXIC was up 10.21 points, or 0.56 percent, at 1,848.43.

In Europe, the pan-European FTSEurofirst 300 .FTEU3 index of top shares closed up 1.8 percent at 859.63 points. The index fell nearly 2 percent last week.

Bonds rallied through much of last week. Yields fell after three U.S. debt auctions totaling a record $104 billion of notes saw above-average demand. Traders were relieved that the global appetite for U.S. government debt did not wane in the face of a deluge of supply.

The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 3.49 percent. The 2-year U.S. Treasury note was break-even in price to yield 1.10 percent.