* World stocks gain, snap two session decline
* Wall Street gains, Europe up, Japan at 11-week low
* US dollar slips after G7 talk
(Recasts; adds details, comments)
NEW YORK, Oct 5 (Reuters) - World stocks rallied on Monday,
after two sessions of declines, even though Japan's Nikkei
index hit an 11-week closing low, while the U.S. dollar fell on
the view policy makers are comfortable with a gradually
weakening U.S. currency.
A Group of Seven finance ministers meeting was a damp squib
to financial markets, with Saturday's statement failing to
allay concern over U.S. dollar weakness.
But some good news came on a report showing the U.S.
services sector expanded after a year of contraction. For more,
see [] Gains in U.S. stocks diminished safe-haven
demand, which also pressured the dollar.
"We are a service economy to a large extent, and finally
getting above the 50 level is a pretty positive signal that
things are picking up," said Owen Fitzpatrick, head of U.S.
Equity Group, Deutsche Bank Private Wealth Management, in New
York. "We're off to a pretty good start this week with that
number."
Friday's worse-than-expected U.S. jobs report had mostly
pressured stocks until markets opened in the New York time
zone. Investors were still wary ahead of the new U.S. corporate
earnings season which begins this week but shrugged off
concerns at least on Monday.
World stocks as measured by MSCI <.MIWD00000PUS> were up
1.1 percent on Monday for a month-to-date loss of around 2.1
percent. Investors had been pulling back from equities after a
hefty rally that began in March.
But the Dow Jones industrial average <> gained 112.08
points, or 1.18 percent, to 9,599.75 on Monday. The Standard &
Poor's 500 Index <.SPX> rose 15.24 points, or 1.49 percent, to
1,040.45. The Nasdaq Composite Index <> added 20.04
points, or 0.98 percent, to 2,068.15.
Financial stocks moved higher after Goldman Sachs upgraded
the large-cap bank sector to "attractive" from "neutral,"
saying share prices for companies in the industry didn't
reflect their earnings power. Goldman upgraded Wells Fargo & Co
<WFC.N> to "buy," and the stock surged 6.9 percent to $28.09.
The FTSEurofirst 300 <> was up around 0.8 percent,
lifted by banks and telecoms, after hitting a four-week closing
low on Friday.
Japan's Nikkei index <>, however, fell 0.6 percent to
an 11-week closing low, dented by shares of exporters on
concerns over the fragility of the U.S. economic recovery.
The latest U.S. earnings season begins Wednesday when
aluminum company Alcoa Inc <AA.N>, a Dow component, is
scheduled to post quarterly results. With second-quarter
earnings primarily boosted by cost-cutting, investors want to
see if the latest results will show an improvement in
revenues.
DOLLAR SLIPS
Though the U.S. dollar slipped after the G7 meeting, the
Australian dollar gained as speculation mounted the country's
central bank could raise benchmark interest rates this week.
The U.S. dollar index, a measure of the greenback's
performance against six other major currencies <.DXY>, fell 0.4
percent, while the euro climbed 0.6 percent to $1.4654 <EUR=>.
The Australian dollar <AUD=> rose 1.4 percent to US$0.8772.
Group of Seven finance ministers and central bankers, who
met in Istanbul at the weekend, broke no new ground on
currencies, urging China to strengthen the yuan to help correct
global imbalances and saying too much foreign exchange market
volatility tended to threaten economic stability.
"G7 turned out to be all bark, no bite," said Boris
Schlossberg, director of currency research at GFT Forex in New
York. "The market shook off any fears of verbal intervention
and went right back to buying euros and selling dollars."
U.S. Treasury debt prices held steady on Monday as a
well-received auction and lingering economic concerns mitigated
the drag from the improved reading of service activity in the
U.S. economy.
A negative perception of the labor market and doubts over
the prospects for a robust recovery continued to support U.S.
government bonds following last weeks dismal jobs data.
Benchmark 10-year notes <US10YT=RR> were flat and yielding
3.22 percent, the same as Friday's close.
A rally in euro zone government bonds faltered on Monday
after gains in European shares dulled the allure of lower-risk
assets. Benchmark 10-year yields were barely changed at 3.13
percent <EU10YT=RR>, holding not far from an almost six-month
low around 3.09 percent set on Friday.
Gold futures <GCZ9> edged up on Monday to well above the
$1,000 an ounce level, on a combination of dollar weakness, a
late rally in crude oil and lingering economic uncertainty.
U.S. crude futures <CLc1> settled higher and well off an
early low on the weak dollar, the equities rally and refinery
snags that supported oil despite lingering concerns about
demand and high inventories. Crude for November delivery <CLX9>
rose 0.7 percent to 70.46 a barrel.
London Brent crude <LCOc1> were down 0.1 percent at $68.01
a barrel.
(Additional reporting by Reuters bureau worldwide)
