* World shares extend gains for fourth straight day
* Euro lifted to $1.2880 by optimism over a Greece aid deal
* China PMI rise boosts confidence in global growth outlook
* U.S. markets closed for Thanksgiving
By Richard Hubbard
LONDON, Nov 22 (Reuters) - World share markets extended a
week-long rally on Thursday as manufacturing surveys in China
and the United States boosted confidence in global growth and
euro zone data at least did not worsen the already weak outlook
for that region.
The euro hit a three high against the dollar on optimism
that a funding deal for debt-crippled Greece will ultimately be
agreed - and despite data indicating the region's economy is on
course for its deepest recession since early 2009.
"The driving factors behind euro/dollar are that the global
macroeconomic backdrop seems to be improving and people are
pricing out the tail risk on Greece," said Arne Lohmann
Rasmussen, head of currency research at Danske Bank.
The euro rose 0.4 percent to $1.2880, its highest
since Nov. 2.
The view there will be a deal to help Athens was bolstered
on Wednesday when German Chancellor Angela Merkel said after the
failure of the latest talks, that an agreement was possible when
euro zone ministers meet again on Monday.
The hopes for a Greek deal, combined with the better
economic data and a growing view that a solution can be found to
the U.S. fiscal crisis, lifted the MSCI world equity index
0.4 percent to 326 points, putting it on track
for its best week since mid-September.
Europe's FTSE Eurofirst 300 index rose 0.4 percent
to a two-week high of 1,101.70 points, with London's FTSE 100
, Paris's CAC-40 and Frankfurt's DAX
between 0.3 and 0.7 percent higher.
However, trading was subdued, with U.S. markets closed for
the Thanksgiving holiday.
Confidence in the global economic outlook got its biggest
boost from the HSBC flash Manufacturing Purchasing Managers
Index (PMI) for China, which pointed to an expansion in activity
after seven consecutive quarters of slowdown.
The Chinese data followed a report on Wednesday showing U.S.
manufacturing grew in November at its quickest pace in five
months, indicating strong economic growth in the fourth quarter.
"There are questions over whether the Chinese economy is
really that bad or if the U.S. will take a long time to recover,
but we are getting signs that the situation is not as bad as
assumed," said Peter Braendle, head of European equities at
Zurich-based Swisscanto Asset Management.
PMI data on the manufacturing and services sectors in
Europe's two biggest economies, Germany and France, added to the
better tone, revealing that conditions had not worsened in
November, though both economies are still contracting.
However, the PMI numbers for the wider euro zone remain
extremely weak, pointing to the recession-hit region shrinking
by about 0.5 percent in the current quarter - its sharpest
contraction since the first quarter of 2009.
"The weak PMI outturn for November is a major disappointment
in light of the increases in the German and French PMI surveys,
and suggest the recession on the euro zone's periphery is
gathering further pace," said ING economist Martin van Vliet.
In the fixed-income markets, the improving tone enabled
Spain to sell 3.88 billion euros ($4.97 billion) of new
government bonds on Thursday, even though it has already raised
enough funds for this year's needs.
The average yield on the three-year bonds in the auction was
3.617 percent, compared with 3.66 percent at a sale earlier in
November and a 2012 average of 3.79 percent.
Ten-year Spanish yields were 6 basis points
lower on the day at 5.67 percent, having traded above 6 percent
at the start of the week.
"It's a clear reflection that sentiment in Spain has
improved markedly," RIA Capital Markets bond strategist Nick
Stamenkovic said, adding that the market was expecting Madrid to
ask for an international bailout early next year.
Expectations Greece will soon get more cash set Greek yields
on course for their 10th consecutive daily fall. The February
2023 bond yield dropped to 16.16 percent, its
lowest since it was issued during a debt restructuring in March.
Commodity prices had some support from the improving outlook
for world demand, but the prospect of only modest global growth
in 2013 kept the gains in check.
Three-month copper on the London Metal Exchange rose
0.6 percent to $7,735.25 a tonne, and spot gold inched up
to $1,730.30 an ounce.
Oil prices were more mixed as the ceasefire between Israel
and Gaza's Hamas rulers on Thursday eased concerns over the
impact the unrest might have had on supply from the region,
offsetting support from the prospect of more Chinese oil demand.
Brent slipped 7 cents to $110.90 a barrel, while U.S.
crude was up 2 cents at $87.40.