* MSCI world index rises along with U.S. stocks
* U.S., China factory sector data supportive
* Euro zone PMIs show euro zone recovery intact (Updates with close of European trading; adds details)
By Caroline Valetkevitch
NEW YORK, May 22 World stock indexes crept higher on Thursday as data showed factory activity picked up in both the United States and China, while U.S. Treasuries prices slipped on the signs of growth in the world's largest economies.
The dollar rose against major currencies as the higher bond yields revived appeal for the greenback.
China's factory sector turned in its best performance in five months in May, while U.S. factory output growth hit its fastest pace since February 2011, reports showed, providing some support for stocks globally.
In Europe, an unexpected pickup in the service industry was offset by lackluster factory activity, though it was enough to show that the euro zone's fragile recovery has some traction.
"The U.S. manufacturing (sector) is certainly in an expansion mode, and that's a good indication going forward, that it will remain on the bullish side of the equation for some time," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. He noted the data was helping to support stocks.
The United States endured a sluggish first quarter, which has given the Federal Reserve some pause, and minutes of its last policy meeting show it was in no rush to raise interest rates.
MSCI's all-world equity index, which tracks shares in 45 nations, gained 0.4 percent. On Wall Street, the Dow Jones industrial average edged up 14.58 points, or 0.09 percent, at 16,547.64. The Standard & Poor's 500 Index was up 6.16 points, or 0.33 percent, at 1,894.19. The Nasdaq Composite Index was up 23.81 points, or 0.58 percent, at 4,155.34.
European shares finished up 0.1 percent after paring early gains as worries over the French economy pulled the Paris bourse lower on the day.
In the foreign exchange market, the dollar index of the greenback's value against the euro, yen and four other currencies was up 0.2 percent at 80.265, bringing its month-to-date gain to about 1 percent.
The euro fell 0.2 percent versus the dollar at $1.3655 , though it was up from a three-month low of $1.36345 on Wednesday, while the dollar gained 0.3 percent against the yen at 101.63 yen after hitting a 3-1/2-month low a day earlier.
U.S. 10-year Treasury yields, which have a good correlation with the dollar/yen pair, edged up to 2.55 percent. Last week, they hit 2.473 percent, the lowest since October.
Low-rated euro zone bonds stabilized as expectations the European Central Bank will ease monetary policy overshadowed concerns about EU elections.
"We are aware the ECB is likely to be active in June regarding some additional accommodative measures. That is likely to be met constructively by the capital markets," said Jim Russell, senior investment strategist at U.S. Bank Wealth Management in Cincinnati.
GOLD GAINS, OIL SLIPS
In commodities, gold prices rose after Wednesday's Fed minutes indicated no intention to raise interest rates soon. Spot gold was up 0.4 percent to $1,294.34 an ounce.
Brent crude oil initially inched up on the better-than-expected data on China's manufacturing industry, which suggested a brighter outlook for demand in the world's No. 2 oil consumer. But oil subsequently gave up the gains, with Brent crude off 10 cents at $110.45 a barrel, while U.S. crude fell 19 cents to $103.88.
(Additional reporting by John Geddie in London, Angela Moon, Chuck Mikolajczak and Richard Leong in New York; Editing by Dan Grebler)