U.S. data boost world shrs; euro near 2-mth high

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By Emelia Sithole-Matarise

LONDON (Reuters) - European shares rose on Friday and the euro held near a two-month high against the dollar, bolstered by positive U.S. data and the European Central Bank's guarded optimism about euro zone recovery.

European stocks tracked gains in Asia after Wall Street made a late-session rally overnight after first-time U.S. jobless claims dropped to their lowest level in two months and a handful of retailers reported solid sales.

The pan-European FTSEurofirst 300 index was up 0.4 percent by 0800 GMT. It has risen around 5 percent so far this week, on track to post its biggest weekly gains since mid-May. World stocks as measured by MSCI added 0.3 percent, supported by the gains in Europe and Asia.

"We've had better information this week, such as German exports, offsetting some of the worries about China slowing down. China will slow down, but it's not going to stop," said Justin Urquhart Stewart, director at Seven Investment Management.

"But the markets can't find any real direction ... and we're not sure about growth next year. But the market is also saying that we're not looking at disasters either."

Fears that recovery from the world's worst downturn in decades could stall had triggered outflows of more than $11 billion from equity funds worldwide in the first week of July and induced the biggest inflows in 18 months for safe haven money market funds, fund tracker EPFR Global said.

The euro was steady around $1.2704, after rising to a 2 1/2-month high of $1.2723.

It broke past resistance at $1.2673 on Thursday following ECB President Jean-Claude Trichet's comments that the euro area economy performed much better in the second quarter although he said it would still grow "at a moderate and still uneven pace in an environment of high uncertainty".

The euro also got a lift from details after European supervisors shored up some confidence in the stress tests they are imposing on banks.

The pickup in risk appetite cut demand for safe-haven government bonds, with German Bund prices extending falls from the previous session. The 10-year German Bund yield, which moves inversely to price, was last up 0.6 basis points at 2.635 percent.

Bunds hit a two-week low on Thursday after the U.S. jobless data and the ECB's guarded optimism concerning the euro zone's economic prospects.

U.S. crude for August rose 30 cents to $75.73 a barrel on Friday, after data showed robust U.S. demand growth and falling inventories and on a pickup in sentiment across financial markets.

(Additional reporting by Umesh Desai and Brian Gorman, editing by Mike Peacock)

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