* World stock markets rise as economic data spurs optimism
* Dollar struggles after sinking to 2009 low versus euro
* Oil jumps 3 pct as factory data spurs hopes of recovery
* Bonds plunge as data, stocks undermine safety bid
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, June 1 (Reuters) - World stocks and oil surged to
2009 highs on Monday as factory activity from China to Europe
and the United States suggested the global recession is easing,
cutting the safety bid for the U.S. dollar and driving it to
lows for the year.
U.S. Treasuries tumbled, with the benchmark yields poised
for their biggest one-day rise in eight months, as the rising
equity markets and surprisingly strong data sapped the
safe-haven appeal of government debt.
Selling by mortgage players in response to the sharp rise
in Treasuries yields also spurred selling of bonds, analysts
said.
The economic data and the dollar's slide against a basket
of currencies and the euro sparked a rally in commodities, with
copper and oil rising to seven-month highs. Crude prices
settled above $68 a barrel.
Contraction in the U.S. manufacturing sector slowed in May
for the fifth straight month, while U.S. consumer spending fell
modestly in April. China said industrial activity expanded in
May and surveys in Europe showed the manufacturing recession
was easing.
"Stock markets are rallying on improved global factory
activity. The dollar is at another five-month low. All that is
being translated into the idea that the worst of the recession
is behind us," said Tom Bentz, an analyst at BNP Paribas
Commodity Futures Inc in New York.
U.S. stocks rose more than 2.5 percent despite General
Motors Corp's <GM.N> filing for bankruptcy, the third-largest
in U.S. history. Once an icon of American industry, GM was
removed from the 30-stock Dow and delisted by the New York
Stock Exchange.
Major industrials led a 220-point gain in the Dow, with
Boeing Co <BA.N> soaring 6.4 percent and United Technologies
Corp <UTX.N> adding 5.1 percent. Energy companies also gained,
with Chevron Corp <CVX.N> up 3.8 percent.
"What this (data) means is things aren't really getting
worse and I guess that is good enough for a rally," said Kim
Caughey, senior investment analyst at Fort Pitt Capital Group
in Pittsburgh.
The Dow Jones industrial average <> closed up 221.11
points, or 2.60 percent, at 8,721.44. The Standard & Poor's 500
Index <.SPX> rose 23.73 points, or 2.58 percent, at 942.87. The
Nasdaq Composite Index <> added 54.35 points, or 3.06
percent, at 1,828.68.
European shares hit their highest close since Jan. 6,
lifted by energy companies and miners.
The FTSEurofirst 300 <> index of top European shares
rose 2.8 percent to 886.27 points.
Oil rose more than 3 percent, extending its biggest monthly
gain in a decade last month as the improving global picture of
factory activity bolstered expectations of economic recovery
and increased for oil.
U.S. crude <CLc1> settled up $2.27 to $68.58, the highest
settlement since Nov. 4. London Brent crude <LCOc1> gained
$2.45 to settle at $67.97 a barrel.
U.S. gold futures ended slightly lower. The August <GCQ9>
gold contract settled down 30 cents at $980 an ounce in New
York.
Commodity-related currencies such as the Australian and New
Zealand dollars, which are considered to be higher risk, hit
eight-month highs against the U.S. currency.
"Generally, this is still a case of better-than-expected
data not necessarily good for the U.S. dollar," said Shaun
Osborne, chief currency strategist at TD Securities in Toronto.
"We expect no rebound in sight for the dollar just yet."
As measured against a basket of major currencies, the
Dollar Index <.DXY> fell 0.01 percent at 79.233.
Against the yen, the dollar <JPY=> was up 1.36 percent at
96.59, and the euro <EUR=> was down 0.06 percent at $1.4143.
Bonds tumbled. The benchmark 10-year U.S. Treasury note
<US10YT=RR> was down 57/32 in price to yield at 3.68 percent.
The 2-year U.S. Treasury note <US2YT=RR> fell 2/32 in price to
yield 0.95 percent.
Risk premiums jumped on U.S. agency mortgage bonds as
Treasury yields leaped and swap spreads rose. Investors were
concerned about the depth of the Federal Reserve's commitment
to buy as much as $1.45 billion in mortgage-related securities
and up to $300 billion of bonds.
MSCI's index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> advanced 2.2 percent to its highest level since
Oct. 2, and is now up 55 percent since world markets bottomed
on March 9.
Japan's Nikkei share average <> ended 1.6 percent
higher.
(Reporting by Chuck Mikolajczak, Nick Olivari, Lynn Adler and
Chris Rees in New York; Brian Gorman, Alex Lawler, Ian Chua,
Michael Taylor and Maytaal Angel in London; writing by Herbert
Lash; Editing by Leslie Adler)
