* U.S. manufacturing at 5 1/2-year high in January
* Bonds, dollar fall on investor risk tolerance
* Investors less fearful about Greece's financial stance
(Updates with closing prices)
By Manuela Badawy
NEW YORK, Feb 1 (Reuters) - World stocks rebounded on
Monday, while U.S. Treasury bonds fell and the dollar slipped
against the euro after data showed U.S. manufacturing at its
strongest in 5-1/2 years in January.
The Institute for Supply Management's index of factory
activity was the strongest since August 2004 and followed
strong manufacturing data from China, Australia and the euro
zone, whetting investors' appetite for risk. For details, see
[]. U.S. equities rose more than 1 percent.
The MSCI world equity index <.MIWD00000PUS> rose 0.94
percent after touching its weakest level since early November
earlier in the day.
The Dow Jones industrial average <> ended up 1.17
percent at 10,185.53. Exxon Mobil <XOM.N>, a Dow component,
reporter stronger-than-expected fourth-quarter earnings.
The U.S. dollar fell against the euro but rose against the
yen as investors bet global economic growth was picking up. The
euro <EUR=> rose 0.52 percent at $1.3934. Against the yen, the
dollar <JPY=> gained 0.39 percent at 90.65 yen.
"A lot of this manufacturing surge that we are seeing is
really the result of business needing to replenish inventories
that had fallen so dramatically during the recession," said
Stephen Gallagher, chief U.S. economist at Societe Generale in
New York.
"It is really telling me that the first half of 2010 is
going to be supported by the restocking," Gallagher added.
Crude oil prices <CLc1> rose 2.11 percent to $74.43 a
barrel, boosted by the dollar's weakness and optimism about
economic recovery. []
U.S. BONDS OFF
Markets showed limited reaction to U.S. President Barack
Obama's budget for fiscal 2011, which forecast a record deficit
of $1.56 trillion in 2010. []
Analysts said the figure was in line with expectations, but
the report was short on details on how to increase revenues
while curbing federal projects, including space missions.
U.S. Treasury prices fell on the fast rate of manufacturing
growth as it rekindled worries about inflation and implied
lower demand for safe-haven bonds. U.S. bond investors were
less fearful that Greece would default on its debt.
Inflation concerns pushed prices on the 30-year Treasury
bond <US30YT=RR> to end down 41/32 after hitting a session low
of 96-23/32. Its yield, which moves inversely to price, was
4.57 percent, up from 4.49 percent on Friday.
Benchmark 10-year notes <US10YT=RR> fell 19/32 in price to
yield 3.66 percent, up from Friday's closing 3.59 percent.
A deficit-cutting plan in Greece is ambitious but
achievable, the EU economic and monetary affairs commissioner
said on Monday. []
European shares closed higher, with the FTSEurofirst 300
<> index ending 0.6 percent higher at 1,018.
(Reporting by Reuters bureaux worldwide; Editing by Kenneth
Barry)
