Shares gain, bonds fall as signs point to world growth

NEW YORK (Reuters) - Global equity markets advanced on Thursday, even as trading of more than 3,000 Nasdaq-listed shares was halted for almost three hours, and bond prices fell after business surveys from around the world reflected a global economy in expansion.

Economic data bolstered expectations the Federal Reserve will trim its bond-buying stimulus program in September.

Purchasing managers surveys showed better-than-expected growth in the euro zone, a rebound in China's vast manufacturing sector and U.S. manufacturing activity rising to a five-month high in August.

Data from the U.S. Labor Department also showed the number of Americans filing new claims for jobless benefits held near a six-year low last week, adding to signs the U.S. economy is starting to find a firmer footing.

While weekly initial claims for state unemployment benefits climbed 13,000 to 336,000 - just above the level expected by economists in a Reuters poll - the four-week moving average fell to its lowest level since November 2007.

The four-week average, seen as a better gauge of labor market trends, suggested the U.S. economy was growing enough to fuel steady improvement in jobs.

However, the report did not change the view that the Fed will begin to trim, or taper, its monetary stimulus next month.

"The Fed tapering theme continues. Yesterday's Fed minutes reinforced expectations that the Fed will taper its quantitative easing program in September and today's jobless claims didn't really change that," said Greg Moore, a currency strategist at TD Securities in Toronto.

"The jobless claims rose, but they were not really that far off from the consensus forecast."

Global equity markets rose, with European shares registering their best session since early August.

MSCI's all-country world index .MIWD00000PUS rose 0.44 percent. The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.94 percent to close at 1,219.03.

The Dow Jones industrial average .DJI was up 66.19 points, or 0.44 percent, at 14,963.74. The Standard & Poor's 500 Index .SPX was up 14.16 points, or 0.86 percent, at 1,656.96. The Nasdaq Composite Index .IXIC was up 38.92 points, or 1.08 percent, at 3,638.71.

Trading resumed in securities listed on a unit of Nasdaq OMX (NDAQ.O), the second-largest U.S. exchange operator, after a glitch in the dissemination of stock quotes halted all its stock traffic. Shares in Nasdaq closed down 3.4 percent at $30.46.

European shares snapped a three-session losing streak after manufacturing survey data for August suggested that growth was taking root in the euro zone.

Markit's Flash Composite Purchasing Managers' Index showed business activity across the euro zone picked up at a faster pace than expected, bouncing to 51.7 from last month's 50.5.

"If you want to understand whether there is a positive or a negative outlook for equities, then PMIs are quite a good measure. We've seen a gradual improvement in PMIs since last July and now we're in growth territory," said James Butterfill, global equity strategist at Coutts.

German yields hit their highest since March 2012 as investors sold low-risk Bunds after forecast-beating business activity data and on expectations the Federal Reserve would soon slow its stimulus.

Ten-year German yields rose as high as 1.943 percent, and closed 4 basis points higher at 1.92 percent.

German Bund futures fell as low as 139.46, their lowest since October 2012. Bunds settled down 41 ticks at 139.73.

U.S. government debt prices also fell for much of the session, pushing yields up. The benchmark 10-year Treasury note last rose 1/32 in price to yield 2.8881 percent.

The dollar hit a more than two-week high against the yen at 98.80 yen, breaking past the August 15 peak of 98.66 yen, which had acted as initial resistance. It was last trading at 98.72 yen, up 1.09 percent.

The euro pared losses to trade near break-even. It was last trading at $1.3355, down 0.01 percent.

Brent crude hovered near $110 a barrel as the upbeat data from China and the euro zone rekindled hopes for stronger demand from two of the world's largest energy consumers, while oil exports from Libya remained limited by strikes and unrest.

October Brent crude settled at $109.90 a barrel, up 9 cents. U.S. crude rose $1.18 to settle at $105.03.

(Additional reporting by Richard Hubbard; Editing by Dan Grebler, G Crosse and Nick Zieminski)

Updated Date: Aug 23, 2013 03:45 AM

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