* Strong U.S. housing data drives stocks, dollar higher
* MSCI world equity index at highest since Oct. 6
* Euro zone services, manufacturing PMI improve
(Updates with U.S. market activity, changes byline, dateline
previously London)
By Al Yoon
NEW YORK, Aug 21 (Reuters) - World stocks and the dollar
rose on Friday after a sharp jump in U.S. home sales and an
optimistic outlook from Federal Reserve Chairman Ben Bernanke
stoked optimism of a global economic recovery.
European shares rose to their highest close since early
November and the euro rose to its highest level against
sterling in nearly one month after a euro zone manufacturing
and services survey showed more improvement than expected.
A 7.2 percent rise in U.S. existing home sales in July that
resulted in the fastest sales pace in two years, reported by
the National Association of Realtors, further ignited markets.
It was the fourth straight monthly rise and signaled that the
end could be in sight for dropping home values and rising
defaults.
"Cracking set of home sales from the U.S.," said Jim
Wood-Smith, head of research at London-based Williams de Broe.
"It is more fuel on the fire of the bull market."
Comments by Bernanke at a Fed conference that prospects for
a return to global growth appeared good in the near term, even
though growth is likely to be slow and unemployment to remain
high, fueled the positive sentiment.
U.S. stocks rose to their highest levels of the year. The
Dow Jones industrials average rose 1.5 percent to 9,486.23
points, while the Standard & Poor's 500 index increased 1.6
percent to 1023.42 points, its highest in 10 months. The Nasdaq
composite rose 1.1 percent to 2,011.09 points.
U.S. home builders were among the strongest gainers, with
the Dow Jones home construction index up 2.99 percent. D.R.
Horton jumped 4 percent to $12.73 and luxury builder Toll
Brothers gained 3.8 percent to $22.74.
In Europe, banking stocks led gains. The European
FTSEurofirst 300 index gained 2.3 percent. The index is up
nearly 50 percent since reaching a lifetime low in early March
and is up about 16 percent for the year.
The decline in the euro zone's dominant services sector
almost came to a halt in August, and businesses' expectations
for the future soared to their highest level in more than two
years, according to a survey by Markit.
Swiss bank UBS rose 6.4 percent after the group said it
sees a strong recovery in the Australian wealth management
market in 12 to 18 months and expects consolidation at the
higher-end of the business as the market recovers from a period
of turbulence.
BNP Paribas, Banco Santander and HSBC were 2 to 5.9 percent
higher.
The MSCI world equity index increased 1.49 percent to
274.10, it highest since its freefall in during the flashpoint
of the financial crisis in October 2008.
Emerging stocks rose 1.2 percent. Chinese stocks climbed
1.7 percent, led by banks after earnings.
"The most decisive thing now is the Chinese stock market,
and as long as the Chinese market holds up, the risky assets
will hold as well," said Koen De Leus, economist at KBC
Securities, the equities arm of Europe's KBC Group.
DOLLAR HIGHER
The U.S. dollar rose versus the yen on Friday after the
U.S. data and the Fed comments supported views of a global
economic recovery and increased risk appetite among investors.
This push prices lower and yields higher on U.S. Treasury
bonds, which reflected concerns about growing supply of
national debt and the inflation it might bring.
Benchmark 10-year Treasury note yields rose 0.12 percentage
point to 3.55 percent. The 10-year euro zone government bond
yield rose 0.06 percentage point to 3.32 percent.
The dollar at midday in New York climbed 0.5 percent at
94.63 yen, near a session high, after trading as low as 93.40
yen earlier.
The euro initially extended its advance versus the dollar
after the headlines but it gave up most of those gains to trade
last up 0.4 percent at $1.4302. It rose to 86.82 pence, its
highest in nearly one month.
(Reporting by Reuters staff worldwide; Editing by Leslie
Adler)
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