(Updates with New York closing prices)
* US shares rise after airlines merger, economic data
* Lingering Greek debt concern weighs, euro declines
* China move on bank reserve rules adds to uncertainty
* For more on Greek debt crisis, click on []
By Al Yoon
NEW YORK, May 3 (Reuters) - Shares rose on Monday after
U.S. consumer spending and factory activity data strengthened
belief in the economic recovery and revived European stocks
that were capped by skepticism over a Greek debt bailout and
the falling euro.
Investors sought risk in stocks after a business group said
U.S. factory activity grew at the fastest pace in nearly six
years. An unexpected rise in construction spending completed
the bullish U.S. data. For details, see []
Investor sentiment also rose after UAL Corp <UAUA.O>,
parent of United Airlines, said it plans to buy Continental
Airlines Inc <CAL.N> for $3.2 billion to form the world's
largest airline. An airlines index <.XAL> rose 2.3 percent.
[]
Measured optimism returned to markets after European
countries agreed to an aid package worth 110 billion euro
($146.5 billion) for Greece over the weekend.
The bailout, the biggest ever for a single country, eased
fears of a near-term sovereign debt default. But it still needs
parliamentary approvals and leaves open the question of whether
other vulnerable European countries might also need help.
The U.S. data supported views that the country that led the
world economy into recession has turned the corner and is on
the way to fledgling recovery.
"Consumer spending is recovering and in a broader context,
the leadership in the recovery is transferring to the consumers
from corporations," said Guy Lebas, a fixed-income strategist
at Janney Montgomery Scott in Philadelphia.
"Still the overall arching theme is that there are less
safe-haven bids for Treasuries from the Greece situation," he
added. "There is a first step toward a resolution, but we are
not out of the woods with Greece yet."
The Dow Jones industrial average <> added 143.22
points, or 1.3 percent, to 11,151.83. The Standard & Poor's 500
Index <.SPX> rose 15.57 points, or 1.31 percent, to 1,202.26
for its best day in two months. The Nasdaq Composite Index
<> gained 37.55 points, or 1.53 percent, to 2,498.74.
Big manufacturers, including Boeing Co <BA.N>, Caterpillar
Inc <CAT.N> and 3M Co <MMM.N>, were up between 1.1 percent and
2 percent, helping drive gains for the Dow index. Apple Inc
<AAPL.O> rose 2 percent after it said it sold 1 million iPads
in the tablet computer's first 28 days on the market.
Also lifting the technology sector, the PHLX semiconductor
index <.SOXX> jumped 2.6 percent.
World stocks as measured by MSCI All-Country World Index
<.MIWD00000PUS> cut losses and eked out a 0.1 percent gain.
Europe's FTSEurofirst 300 <> rose 0.2 percent to
1,065.56. Germany's DAX <> gained 0.5 percent, while
Spain's IBEX 35 <> fell 0.7 percent. UK and Japanese
markets were closed for a holiday.
Strong quarterly earnings have helped boost U.S. equities
in recent weeks. Of the 337 companies in the S&P 500 that have
reported first-quarter results, 78 percent had profits that
topped analysts' expectations, according to Thomson Reuters
Proprietary Research. Nearly three-quarters of European firms
beat market estimates, Thomson Reuters data showed.
Shares of companies that make products used to counteract
the oil spill in the Gulf of Mexico gained, with Nalco Holding
Co <NLC.N> up 5.9 percent to $26.19 and Superior Energy
Services Inc <SPN.N> rising 1.2 percent to $27.38.
BP Plc, <BP.L> <BP.N> whose ruptured oil well is wreaking
havoc with commerce and the environment, fell 3.8 percent to
$50.19. [].
In currencies, the euro fell as the Greek bailout removed
the imminent threat of default but failed to dispel fears about
whether the euro zone country would honor new pledges for
drastic wage cuts and tax increases.
Markets were also wary of potential obstacles to the plan,
since countries such as Germany require parliamentary approval
before money can be released. Greece needs the first of the
funds by May 19 to meet a big repayment to creditors.
The Athens' bourse's banking index <.FTATBNK> lost 1.3
percent in choppy trade, shedding initial gains after the
European Central Bank said it would accept all Greek government
bonds as security for loans, even if its credit rating fell.
More short-term uncertainty was added to markets after
China increased bank reserve requirements in a bid to tame
liquidity and inflationary expectations.
The euro <EUR=> failed to hold initial gains after the
Greek aid deal.
"For the moment, the threat of default on the part of the
Greek government has been lifted, with the operative words here
being 'for the moment,' said Dennis Gartman, an independent
trader. "More problems exist, and we should have every doubt --
a lesson drawn from history -- that Greece shall ... be able to
abide by newly imposed austerity measures."
The euro lost 0.78 percent against the dollar to $1.3191.
Against the Japanese yen <JPY=>, the greenback rose 0.77
percent to 94.53, and the U.S. Dollar Index <.DXY> gained 0.61
percent to 82.363.
Ten-year Greek bond yields <GR10YT=TWEB> fell to 8.76
percent from 9.58 percent on Friday, and the premium investors
demand to hold them rather than German Bunds declined.
Yield spreads for Portugal and Spain debt also narrowed,
although modestly, and losses in German Bunds were contained as
markets remained wary that other expensive measures might be
needed to shore up other euro zone economies.
Portugal successfully bought back 1 billion euros of bonds
expiring this month on Monday, offering reassurance to
investors concerned the country might struggle to redeem its
debt. []
Yields on benchmark 10-year Bunds <EU10YT=RR> rose to 3.07
percent, while 10-year U.S. Treasuries <US10YT=RR> increased
0.03 percentage point to 3.69 percent.
In energy and commodities trading, U.S. light sweet crude
oil <CLc1> fell 10 cents, or 0.12 percent, to $86.05 per
barrel, and spot gold prices <XAU=> rose $2.70, or 0.23
percent, to $1180.90.
(Additional reporting by Tamawa Desai, Atul Prakash and
Kirsten Donovan in London, and Richard Leong, Steven C. Johnson
and Rodrigo Campos in New York; Editing by Dan Grebler)
