Dollar, equities gain on upbeat data, Microsoft

NEW YORK (Reuters) - The dollar rose and equity markets rallied on Monday as investors welcomed upbeat manufacturing data from around the world and as Microsoft’s pursuit of TikTok’s U.S. operations and other deals bolstered sentiment.

FILE PHOTO: Traders wear masks as they work on the floor of the New York Stock Exchange as the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York, U.S., May 28, 2020. REUTERS/Lucas Jackson

Gold prices retreated from a record high after some profit-taking and the dollar’s strengthening, though concerns about the coronavirus’ toll on the economy limited bullion’s losses.

Oil prices rose as manufacturing data from the United States, Europe and China offset oversupply fears fueled by the prospect of the Organization of the Petroleum Exporting Countries and its allies winding back output cuts.

MSCI's benchmark for global equity markets rose 0.79% to 556.26. Europe's broad FTSEurofirst 300 index .FTEU3 closed up 2.1% at 1,413.87, lifted by a reading of IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) for the euro zone.

The index bounced to 51.8 in July, its first time above the 50 mark separating growth from contraction since January 2019.

Manufacturing activity in China expanded at the fastest pace in nearly a decade as domestic demand improved, China’s Caixin/Markit PMI showed, suggesting the world’s second-largest economy would help cushion the pandemic’s blow to world growth.

In the United States, manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July as orders increased despite a resurgence in new COVID-19 infections, the Institute for Supply Management said.

“There’s good feelings in the stock market. You’re seeing that with earnings and you’re seeing that with some of the PMI numbers,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “People were really expecting the worse. Things are bad, but not as bad as predicted.”

Wall Street's advance was driven by Microsoft MSFT.O, whose shares rose 5.6% after it formally declared interest in TikTok's U.S. operations on Sunday, Meckler said.

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ADT ADT.N surged 57% on news that Alphabet's GOOGL.O Google was buying a nearly 7% stake in the home security firm for $450 million in a deal that will allow it to provide service to customers of its Nest home security devices.

“Investors are going with what’s worked for them and they’ve decided technology has survived what they see as the worst of the pandemic,” Meckler said.

The Dow Jones Industrial Average .DJI rose 0.89%, the S&P 500 .SPX gained 0.72% and the Nasdaq Composite .IXIC advanced 1.47% to set a record closing high.

Technology .SPLRCT led S&P's 11 sectors with a gain of more than 2.6%. Apple's AAPL.O overtaking of Saudi Aramco 2222.SE on Friday to become the world's most valuable company also helped fuel the tech rally. The tech giant is about $140 billion short of hitting $2 trillion in market capitalization. (Graphic: Apple beats Saudi Aramco, here)

The dollar rose against a basket of currencies as investors unwound some recent short positions after the currency posted its weakest monthly performance in a decade in July. Gains were slowly pared as the day progressed.

Speculators’ net shorts on the dollar are at their highest since August 2011 at $24.27 billion, Reuters calculations and U.S. Commodity Futures Trading Commission data show.

The dollar index rose 0.111%, with the euro down 0.1% to $1.1762. The Japanese yen weakened 0.04% versus the greenback at 105.94 per dollar.

Oil rose. Brent crude futures settled up 63 cents at $44.15 an ounce. U.S. crude futures rose 74 cents to settle at $41.01 a barrel.

Gold closed little changed, but was poised to break through the $2,000-an-ounce mark.

U.S. gold futures GCv1 settled mostly unchanged at$1,986.30 an ounce.

Further dollar gains were likely to be capped by the slowing U.S. recovery and real rates breaking below -1% for the first time.

The real rate hit a record low amid a marked flattening of the yield curve as investors wager on more accommodation from the Federal Reserve.

Benchmark 10-year Treasury yields US10YT=TWEB rose 1.7 basis points to 0.527% after touching the lowest level since March last week.

German government bond yields fell slightly to -0.525%.

China's manufacturing data helped blue chips .CSI300 rally 1.6%, offsetting worries about U.S.-China relations.

Japan's Nikkei .N225 added 2.2%, courtesy of a pullback in the yen.

Reporting by Herbert Lash; editing by Jonathan Oatis and Tom Brown