* Less grim Chinese, U.S. data revive investor optimism
* Chinese inflation high but within central bank control
* Global stocks rally; S&P pct rise biggest since April
* Euro, oil, gold strengthen; bonds tumble (Updates market action, adds Bernanke in paragraph 12)
By Richard Leong
NEW YORK, June 14 (Reuters) - Chinese data showing the world's second biggest economy might be able to avoid a hard landing and U.S. retail sales data that was not as weak as feared lifted stocks, oil and other growth-oriented markets on Tuesday.
In the currency market, emboldened investors drove up the euro despite lingering jitters over Greece's debt problems after it became S&P's lowest-rated sovereign borrower. The renewed appetite for risk, however, routed low-risk government bonds.
China's inflation accelerated to its fastest in almost three years, and its industrial output grew a solid 13 percent from a year ago. Its central bank, in an effort to curb inflation, later increased the reserve requirement ratio for commercial lenders by 50 basis points. For details, see [ID:nL3E7HE05P]
The data showed inflation at multi-year highs, but did not exacerbate fears that it is running out of control. This raised hopes that Chinese policy-makers could gradually tighten policy to cool local wage growth and its red-hot property market without subtracting too much from overall growth, a so-called soft landing.
"Based on the data overnight, the odds are favoring a soft landing. It's making people more optimistic," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, which oversees $400 billion in assets.
In the United States, retail sales in May fell for the first time 11 months, but the drop was less than expected, signaling the resilience of American consumers despite sluggish job growth and a lousy housing market. [ID:nN14189765]
The U.S. stock market jumped, with the Dow Jones industrial average <.DJI> was up 154.85 points, or 1.30 percent, at 12,107.82. The Standard & Poor's 500 Index <.SPX> was up 19.00 points, or 1.49 percent, at 1,290.83. The Nasdaq Composite Index <.IXIC> was up 43.22 points, or 1.64 percent, at 2,682.91.
The S&P 500 is on track for its biggest one-day percentage rise since March, shaving its month-to-date loss to 4 percent.
Top European stocks <.FTEU3> rose 0.8 percent, while Tokyo's Nikkei <.N225> ended 1.0 percent higher.
Some analysts cautioned the gains in stocks and risky markets could be short-lived as sovereign debt problems in Europe and the United States fester and the Federal Reserve's $600 billion bond program expires at the end of June.
"A one-day rally is not going to change the situation," said Robbert Van Batenburg, head of global research at Louis Capital Markets in New York.
U.S. Fed Chairman Ben Bernanke, speaking at an event sponsored by the Committee for a Responsible Federal Budget, warned that a failure to increase the government's $14.3 trillion debt ceiling would risk United States' coveted AAA-rating and damage the dollar's status as a reserve currency. For more, see [ID:nW1E7GV02N]
GREECE SELLS DEBT
Also reducing investor anxiety was Greece's ability to raise short-term funds after Standard & Poor's downgraded its rating closer to default territory. [ID:nN13126859]
Greece sold 1.625 billion euros ($2.33 billion) of 6-month T-bills at a yield of 4.96 percent, which was higher than May. But the bill auction attracted more foreign buyers, reflecting market expectations Greece will secure a second rescue package worth about 120 billion euros to stave off default.
On the other hand, the five-year cost of insuring against a Greek default rose to a record peak of 1,615 basis points, as did the yield on Greek government bonds. [ID:nLDE75D0ZT]
Greece's trials did little to discourage investors from buying the euro.
The euro rebounded a day after it hit a record low against
the Swiss franc
The euro rose to $1.4480 against the greenback, up 0.5
percent on the day
Investors also channeled money into commodities at the expense of government bonds.
ICE Brent July crude
Spot gold
A sell-off in the U.S. government bond market pushed benchmark yields to their highest level in almost two weeks at 3.09 percent. German Bund futures fell 49 basis points at 125.45 after posting a contract high of 126.11 on Monday. (Reporting by Caroline Valetkevitch, Chris Reese, Robert Gibbons, Frank Tang and Wanfeng Zhou, Editing by Chizu Nomiyama)