* Euro slips on poor sentiment report, Italy bond auction
* Brent oil rises toward $118 as Gulf storm threatens
* U.S. stocks rise after surprisingly strong U.S. data (Updates with opening of U.S. markets; changes dateline, previous LONDON and byline)
By Herbert Lash
NEW YORK, July 28 (Reuters) - Global equities and the euro fell on Thursday as weak euro zone data and a lackluster Italian bond auction heightened worries about debt contagion, but surprisingly strong economic reports buoyed U.S. markets.
Stocks on Wall Street trended higher after data showed the number of Americans claiming new unemployment benefits last week dropped below the 400,000 level for the first time since early April, a hopeful sign for an anemic U.S. economy. For details see: [ID:nN1E76R0BE]
U.S. stocks briefly added to slight gains after pending sales of existing U.S. homes unexpectedly rose in June from May. [ID:nN1E76R0JI]
But European data showing euro zone economic sentiment worsened more than expected to 103.2 in July from 105.4 in June, with business optimism falling in all sectors, weighed on negative sentiment toward the euro. [ID:nB5E7HM00R]
The euro
"The euro seems to be the flavor du jour at the moment as the market is trading on euro zone contagion issues and the dollar is appreciating by default," said Dean Popplewell, chief currency strategist at OANDA in Toronto.
European shares fell for a fourth straight session, hitting a one-week low as disappointing earnings and cautious comments from major European companies raised concerns about corporate profits. [ID:nL6E7IS13Y]
Chemical shares bore the brunt of a broad sell-off after
BASF
The FTSEurofirst 300 <.FTEU3> index of top European shares dropped 0.2 percent to 1,086.34 points.
A bounce-back on Wall Street came after U.S. stocks suffered their worst day in eight weeks on Wednesday. The S&P lost 2 percent on weak earnings, lackluster economic data and as U.S. politicians struggle to agree over the nation's debt ceiling days before the deadline to avoid default.
Prices on long-dated U.S. government bonds touched session highs in early trading with the 30-year yield briefly dipping below 4.25 percent. [ID:nNYE003081]
The benchmark 10-year U.S. Treasury note
Brent oil rose above $118 as a storm heading toward the Gulf of Mexico raised the threat of supply disruption and wary traders waited to see whether the United States could break a political deadlock over its debt limit. [ID:nL3E7IS0O1]
Brent
U.S. crude
Spot gold prices