By Atul Prakash
LONDON (Reuters) - Global stocks climbed on Monday, moving further away from eight-month lows hit last week, as strong U.S. data and encouraging third-quarter earnings eased concerns about the pace of global economic recovery.
The MSCI world equity index (MIWD00000PUS), which tracks shares in 45 countries, was up 0.3 percent by 6.30 a.m. EDT, having fallen about 10 percent in four weeks to last week's lows.
The dollar also rose against major currencies, supported by a surprisingly strong survey of U.S. consumer sentiment and robust housing starts figures on Friday that signaled solid growth in the world's biggest economy.
The European Central Bank's announcement that it has started buying covered bonds as part of a new stimulus package announced in June had a modest initial impact, lifting some European bank stocks.
"Calm returns after last week's roller-coaster ride," Saxo Bank trader Andrea Tueni said, adding that although sentiment remained fragile, stocks appeared to have hit a low.
"U.S. macro data is reassuring, the earnings season has been quite good so far, and we're getting positive news such as Japan's big pension fund boosting its exposure to equities."
Japan's $1.2 trillion Government Pension Investment Fund is likely to raise its allocation for domestic stocks to about 25 percent, people familiar with the process said on Saturday. The world's biggest pension fund, its war chest is larger than the annual output of Mexico's economy.
That news and the upbeat U.S. data fueled a 4 percent surge in Japan's Nikkei (N225) on Monday, its biggest daily rise since June 2013, helped also by the weaker yen, which is good for the country's exporters.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) surged 1.2 percent overnight. The pan-European FTSEurofirst 300 index (FTEU3) fell 0.5 percent, however, as a profit warning by technology firm SAP (DE:SAPG) hit the sector.
"Last week's market turmoil largely reflects market technicals and positioning, rather than a fundamentally justified reassessment of global growth," UBS economist Larry Hatheway said in a note.
"European data aside, global leading indicators of economic activity are not pointing to a broad-based slowdown in growth. If anything, some indicators suggest that growth will actually strengthen modestly in the period immediately ahead."
Global stocks also got some support from encouraging U.S. earnings reports. Out of the 81 S&P 500 component companies that have reported third-quarter results so far, 64.2 percent have beaten expectations, a rate slightly below the average over the past four quarters but better than the past 20 years.
Major U.S. companies announcing results on Monday include Apple (O:AAPL) and International Business Machines (N:IBM).
U.S. stock futures
The dollar rose against the safe-haven yen
News that Japan's pension fund was also likely to boost its holdings of overseas assets, spurring demand for foreign currencies, helped.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.1 percent to 85.181 <.DXY> after dropping to a three-week low of 84.472 last week.
"The market is more stable today after last week's volatility. We've seen a tentative pick-up of risk sentiment, and that's leading to a recent reversal of safe-haven driven gains," said Lee Hardman, a currency economist at Bank of Tokyo-Mitsubishi UFJ in London.
Euro zone bond yields dipped as concerns about a slowdown in global growth eased. German 10-year Bund yields
In commodities, Brent crude
(Additional reporting by Blaise Robinson in Paris, Jemima Kelly in London and Lisa Twaronite in Tokyo; Editing by Catherine Evans)