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NEW YORK (Reuters) - World equity markets rallied for a fourth day on Thursday, lifted by a surprise drop in Americans seeking unemployment benefits last week, while crude fell on a cut in global demand forecasts as U.S. oil supplies hit a two-decade high.
Japan's aggressive monetary easing and signs of a growing recovery in China also lifted equity markets, with the Dow Jones and S&P 500 stock indexes setting new closing record highs.
The 42,000 drop in initial claims for state unemployment benefits to a seasonally adjusted 346,000 could ease fears of a marked deterioration in U.S. labor market conditions after a surprise stumble in job growth in March.
"This data is especially welcome on the heels of last week's jobs report, and it just adds to the tremendous demand that there continues to be for equities," said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York.
"The money that has been waiting for a pullback is running out of patience," he said.
Adding to investor optimism was an improved forecast from retail executives and analysts for same-store sales in April after last month's ho-hum start to spring due to cold weather.
Wall Street rose despite news of a 14 percent plunge in personal computer sales in the first quarter, the sharpest drop in two decades of record-keeping, which pulled down shares of Microsoft Corp. (MSFT.O), Hewlett-Packard Co (HPQ.N) and Intel Corp. (INTC.O), among other technology-related issues.
The plunge marks a milestone in the apparent ebbing of the PC age as computing goes mobile via tablets and smartphones.
The Dow Jones industrial average .DJI closed up 62.90 points, or 0.42 percent, at 14,865.14. The Standard & Poor's 500 Index .SPX rose 5.64 points, or 0.36 percent, at 1,593.37. The Nasdaq Composite Index .IXIC gained 2.90 points, or 0.09 percent, at 3,300.16.
MSCI's all-country world index .MIWD00000PUS rose 0.62 percent, a day after posting its second-best gain of the year.
European shares rose on bumper gains for asset managers, which benefited from this year's equity rally lifted financial stocks.
Fund managers and traders said even if there were a pull-back, it would not be enough to stop European equity markets from gradually rising higher over the course of the year.
The FTSEurofirst 300 index .FTEU3 of leading regional shares closed up 0.56 percent at 1,192.87.
The euro zone's blue-chip Euro STOXX 50 .STOXX50E advanced 0.5 percent to 2,674.33.
Italian and Spanish government bond yields crept higher as investors took profits on recent gains in lower-rated debt, which has been driven by demand for yield in an easy monetary policy environment.
Since the Bank of Japan unveiled its radical stimulus program a week ago, the dollar has gained a whopping 7 percent, yields on major government bonds have fallen and MSCI's world equity index has hit levels last seen in June 2008.
The latest gains in equities have been helped by evidence of an economic recovery in China - notably signs of growing domestic demand and easier credit - and by indications from the European Central Bank last week that it may cut rates.
"The stronger-than-expected Japanese liquidity surge has led us to reassess our views on risky assets," said Salman Ahmed, fixed income strategist at Lombard Odier Investment Managers.
The benchmark 10-year U.S. Treasury note was up 4/32 in price to yield 1.7913 percent.
Brent crude oil fell below $105 per barrel, not far above an eight-month low, after analysts cut forecasts for global oil demand growth and U.S. crude oil stocks increased to their highest in more than two decades.
Brent futures for May delivery settled down $1.52 at $104.27 a barrel. U.S. crude futures fell $1.13 to settle at $93.51 a barrel.
The dollar hovered close to a four-year high against the yen, with gains above the key 100 yen level highly expected given the massive amount of bonds the Bank of Japan plans to buy to buoy its economy.
While the pace of the rally has slowed due to option barriers at 100 yen, most analysts believe it is only a matter of time until that mark is reached.
The dollar has not risen above 100 yen since April 2009.
The dollar was up 0.06 percent at 99.83 yen.
U.S. jobless claims: link.reuters.com/xew34t
U.S. natural gas inventories: link.reuters.com/mup44s
U.S. same-store sales: link.reuters.com/dex34t
Reuters asset allocation poll: link.reuters.com/gex36t
Reporting by Herbert Lash; Editing by Dan Grebler and James Dalgleish