World stocks hit 2-week highs

By Ian Chua

LONDON (Reuters) - Global stocks hit two-week highs on Thursday with European equities playing catch up to strong gains overseas, but more grim economic reports briefly sent government bond yields in Europe to a fresh three-year low.

Trading though is seen lackluster with Wall Street staying shut for the Thanksgiving Day holiday.

Renewed expectations that Washington will bail out the U.S. motor industry and China's aggressive interest rate cut on Wednesday had helped lift some of the gloom surrounding the global economy.

But there was no shortage of bleak news with two of Britain's high profile retailers DSG and Kingfisher posting downbeat results and weak outlooks, while a report showed euro zone economic sentiment plunged to a 15-year low this month. See

A string of dismal U.S. economic reports this week has also caught up with the dollar, pushing it lower against a basket of major currencies, while political risk emerged after attacks in India's financial capital.

More than 100 people have been killed with scores more trapped by Islamist gunmen in Mumbai after attacks on luxury hotels, hospitals and a landmark cafe.

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For now though, stocks are eking out gains. The FTSEurofirst 300 index of top European shares rose 1.9 percent, Britain's FTSE 100 index put on 1.4 percent and Germany's DAX climbed 1.6 percent.

This followed gains of 2 percent for Japan's Nikkei, 2.4 percent for MSCI's measure of other Asian stock markets. On Wednesday, the U.S. Dow Jones industrial average rallied 2.9 percent.

MSCI world equity index climbed 0.9 percent to 217.82, having earlier reached a peak of 218.46 -- a level last seen in November 14.

"There is cash about. In asset allocation terms, people are very underweight equities and there may be a number of cases so far underweight that they've got to put money to work in the equity market ... ahead of month end," said Marc Ostwald, strategist at Monument Securities in London.

Meanwhile, the dollar eased 0.2 percent against a basket of major currencies.

"The greenback for long the beneficiary of safe haven flows has over the past couple of days been forced on the defensive as poor economic news weighed on the market," said Mitul Kotecha, head of global foreign exchange strategy at Calyon.

"Yesterday's data releases added to these woes, showing a huge drop in durable goods orders, a decline in personal spending, a weak Chicago PMI and another big increase in initial jobless claims. The latter points to a USD unfriendly non-farm payroll report next Friday."

BOND YIELDS HIT 3-YEAR LOW