By Wanfeng Zhou
NEW YORK (Reuters) - Global shares climbed to two-week highs on Thursday as strong corporate earnings offset weak U.S. economic data but concerns about Spain's financial troubles drove the euro broadly lower.
Commodities rallied, with oil prices rising 3 percent as Middle East tension stoked supply worries. Corn and soybeans soared to record highs as a U.S. farm-belt drought worsened.
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The positive sentiment was tempered, however, by weaker-than-expected readings on U.S. manufacturing, housing and labor markets. Adding to investor concern was a spike in Spain's borrowing costs, which stoked fears Madrid may eventually need a full-blown sovereign bailout.
"It is baked into stock prices that growth is going to be slow for a little while," said Giri Cherukuri, head trader at OakBrook Investments in Lisle, Illinois.
"People are focusing on individual stocks after earnings and trying to figure out (through) outlooks how weak the economy really is," he said.
The Dow Jones industrial average rose 54.27 points, or 0.42 percent, to 12,962.97. The S&P 500 Index gained 6.15 points, or 0.45 percent, to 1,378.93. The Nasdaq Composite Index advanced 30.31 points, or 1.03 percent, to 2,972.91.
The MSCI world equity index gained 0.9 percent to 315.41. European shares rose 1 percent to end at 1,064.47.
French industrial conglomerate Alstom
The euro fell 0.2 percent to $1.2265. It also hit a record low against the Australian dollar and a 3-1/2-year trough versus sterling.
Ten-year Spanish bond yields rose above the 7 percent line seen as unsustainable after the country paid euro-era record yields for five-year funding as investors remain concerned about its finances and growth prospects.
"The risk is that yields could start rising also in shorter maturities, where Spain is doing most of the funding, and that will basically be game over for Spain," said Gianluca Ziglio, a strategist at UBS.
Germany warned that Spain's financial troubles are far from over and its government should be ultimately responsible for European aid to its banks.
Finance Minister Wolfgang Schaeuble said the mere perception of insolvency risk in Spain could cause contagion in the euro zone.
Brent crude gained for a seventh straight day, rising $2.93 to $108.09 a barrel after an earlier high of $108.17. U.S. oil gained $2.93 to $92.80.
The killing of several Syrian security chiefs on Wednesday and a deadly attack on Israeli tourists in Bulgaria, which Israel accused Iran of carrying out, fueled worries over the Middle East, source of more than a quarter of the world's oil.
Spot gold rose to $1,588 an ounce.
Chicago Board of Trade spot September corn hit a record high $8.12 per bushel. August soybeans posted a record peak at $17.46-1/2. The month-long rally was fueled by fears of a food crisis similar to that in 2008, when riots broke out in some countries.
"I hesitate to use those words (food crisis) but the circumstances are more severe now than they were in 2008," said Dennis Gartman, a commodity trader and editor/publisher of The Gartman Letter.
In the U.S. government debt market, the benchmark 10-year U.S. Treasury note was down 2/32 in price, with the yield at 1.4992 percent.
Factory activity in the U.S. Mid-Atlantic region contracted for a third straight month in July and the number of Americans filing new claims for jobless aid surged last week, data showed on Thursday. A separate report showed U.S. home resales fell to the lowest level in eight months in June.
"While we believe that economic conditions have not deteriorated sufficiently to push the Federal Reserve over the edge, the odds of further policy action being taken in the near-term have clearly risen," said Millan Mulraine, senior macro strategist at TD Securities in New York.
(Additional reporting by Ryan Vlastelica in New York and Lucia Mutikani in Washington; Editing by James Dalgleish)