* Europe's central banks follow Fed in leaving policy
* Official Chinese data and euro zone PMIs point to growth
* Dollar up from 6-week lows as euro dips
* European shares higher, oil near $109 a barrel
By Richard Hubbard
LONDON, Aug 1 (Reuters) - World shares, the dollar and oil
all rose on Thursday after central banks in Europe joined the
U.S. Federal Reserve in leaving policy unchanged to support a
tentative recovery in the global economy.
The European Central Bank and the Bank of England both ended
their latest policy meetings by leaving rates at record lows, a
day after the Fed said the U.S. economy still needed its support
and avoided any mention of a change to its stimulus programme.
The promise of abundant liquidity came as data for July
revealed industrial activity picking up in the euro zone for the
first time in two years, greater stability in China's vast
factory sector and a surge in British production.
"They (central banks) want to keep the monetary conditions
that are currently pretty accommodative in place to ensure the
recovery continues," said ING economist James Knightley.
A report on U.S. manufacturing activity due later is also
expected to show a modest rate of growth, building on the
positive performance by the U.S. economy revealed in second
quarter GDP data on Wednesday.
The better outlook encouraged investors back into riskier
assets, lifting MSCI's world equity index 0.4
percent, sparking a rally in major euro zone government bonds
and sending Brent oil up over $1 a barrel near $109.
U.S. stock index futures signalled that Wall Street would
head higher as well with hopes rising that Friday's key July
payrolls report will point to another solid rise in jobs.
However, traders said a strong employment report would
increase the likelihood the Fed could begin scaling back its
stimulus in September - a move that could hurt the gains in
equities and commodities though it would support the dollar.
"We're very much looking for the dollar to continue to gain
support, given the heightened expectations for non-farm
payrolls, which are centred around the 200,000 mark," said Ian
Stannard, head of European FX strategy at Morgan Stanley.
Employment outside the farming sector is seen rising by
184,000 during July, according to economists polled by Reuters.
The dollar index, which tracks the greenback's performance
against a basket of major currencies, gained 0.7 percent to
82.02, though still not far from a six-week low touched
on Wednesday after the Fed's policy announcement.
The euro had slipped 0.5 percent to trade around $1.3240
, off Wednesday's six-week high of $1.3345.
The encouraging Chinese manufacturing data, along with some
strong corporate earnings and central bank actions, combined to
lift European shares 0.8 percent by late morning to
near a one-week high.
The STOXX Europe 600 Basic Resources index of mostly
mining shares was among the big gainers, climbing 2 percent,
while bank stocks jumped 1.6 percent after France's
Societe Generale said its second-quarter earnings had
more than doubled.
Earlier, after the improvement in China's official
industrial activity survey eased concerns of a sharp slowdown in
the world's second largest economy, Japan's Nikkei to jump 2.5
percent for its biggest one-day gain in three weeks.
Asian shares tracked by MSCI's Asia-Pacific ex-Japan index
were more subdued though, adding 0.3 percent to
snap a three-day losing run, while a rival report from HSBC
showed factory activity in China running at its lowest in nearly
In the fixed income markets, euro zone government bonds
enjoyed solid demand thanks to the central bank's commitment to
low rates, including in Italy and Spain where political risk was
reaching crunch point.
"What we are still seeing here is the impact of the Fed
statement. Basically what it says is that (the) probability of
tapering starting in December has increased versus September, so
an overall dovish statement by the Fed," Elwin de Groot, senior
market economist at Rabobank said.
Ten-year German yields fell 6.8 basis points
to 1.61 percent and yields on bonds issued by other highly-rated
euro zone countries, including Austria, France, Belgium and the
Netherlands, fell by about 5 to 6 basis points.
Equivalent Spanish yields were 2.5 bps lower
at 4.60 percent as Spain sold bonds, while Italian 10-year debt
fell 4 bps to 4.38 percent.