* World stocks rally on economy hopes
* European shares up 1.6 percent, Japan 1.2 percent
* Dollar rises about 101 yen
* Euro zone government bonds weak
By Jeremy Gaunt, European Investment Correspondent
LONDON, April 6 (Reuters) - World stocks rose for a fifth
straight session on Monday as investors sought bargains against
a background of increasing optimism about the global economy.
Underlining the mood, the Japanese yen, which usually gains
when investors worry about risk, fell to a six month low against
the dollar.
"Hopes that recent global economic stabilisation packages
will work has revived sentiment," U.S. financial giant Citi said
in a note to clients, although it also warned against
overconfidence.
MSCI's all-country world index <.MIWD00000PUS> rose 0.8
percent for a 7.3 percent gain so far in April. It is now down
less than 5 percent for the year.
U.S. home sales, auto sales data; company purchasing
managers' surveys, and reports on credit in the UK, have all
offered a more optimistic readout than that to which investors
have become accustomed.
(For an overview click on []; for the top five
themes of the week click on [])
The FTSEurofirst 300 <> index of top European shares
was up 1.6 percent, tracking strong gains in Asia and a late
rally in the United States on Friday. The index has risen around
21 percent since hitting a lifetime low on March 9.
Earlier, Japan's Nikkei average rose 1.2 percent to strike a
three-month closing high. The benchmark <> gained 108.09
points to 8,857.93.
No impact was seen from Sunday's launch by North Korea of a
long-range rocket that flew over Japan. []
SELLING YEN
Helping Japanese stocks, especially exporters, was the
falling yen.
The Japanese currency fell broadly as investors took on
perceived riskier assets. The dollar rose above 101 yen <JPY=>,
the highest in almost six months, while the euro also extended
gains against the Japanese currency to levels last seen in
October <EURJPY=>.
"Markets are taking heart that the pace of economic
contraction is fading," said Lee Hardman, currency economist at
Bank of Tokyo-Mitsubishi UFJ. "That is helping risk assets and
prompting the unwinding of safe assets."
The dollar was up 0.8 percent at 101.15 yen, after rising to
101.23 yen <JPY=>, the highest since Oct. 21, 2008, according to
Reuters data. The dollar, however, lost ground against other
major currencies as risk appetite improved.
The euro gained 0.4 percent to $1.3534 <EUR=>.
Euro zone government bond prices were weak. Two-year bond
yields <EU2YT=RR> were 1 basis point higher at 1.543 percent,
having risen as high as 1.62 percent, and 10-year yields
<EU10YT=RR> were flat at 3.243 percent, around highest since
mid-February.
(Additional reporting by Tamawa Desai; editing by Patrick
Graham)
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