GLOBAL MARKETS-Stocks rally on China; data halts dollar, bonds

* Global stocks rally as China, data revive recovery hopes

* Oil falls from 7-week high on rising U.S. jobless claims

* Dollar, bonds little changed after mixed U.S. data

* Rise in U.S. jobless claims offsets factory activity (Updates with U.S. markets activity, changes dateline; previous LONDON)

By Herbert Lash

NEW YORK, Aug 20 (Reuters) - Global stocks rallied on Thursday after an equity rebound in China and some solid corporate results reassured investors, but oil prices and the dollar faltered as an unexpected rise in U.S. jobless claims dented recovery hopes.

The dollar treaded water against the euro and yen in thin trade and the rise in weekly U.S. jobless claims led industrial metals to pare gains and curb the effects of higher equities and an upbeat outlook from global miner Rio Tinto [ID:nN20517770] . [ID:nLK446374]

U.S. and euro zone government bonds struggled to make much headway as the U.S. jobless data pointed to a still weak labor market. But debt losses were limited after a surprise rise in U.S. regional manufacturing. [ID:nN20513029]

Global sentiment improved after Chinese stocks <.SSEC> jumped 4.5 percent in their second-biggest daily percentage gain this year and eased concerns about an almost 20 percent slide in China's equity markets over the past two weeks.

"Investor sentiment appears to be oscillating between risk aversion and relief on a session-by-session basis," said Sreekala Kochugovindan, a strategist at Barclays Capital.

"However, the past month has been characterized by declining volumes typical of the summer holiday season. History suggests that trends established during periods of low trading volumes have swiftly petered out once volumes picked up."

World stocks as measured by MSCI <.MIWD00000PUS> were up 1.2 percent.

Britain's leading share index advanced in a broad-based rally, and European shares closed higher as construction stocks gained after Holcim results pleased investors.

Cement maker Holcim gained 5.7 percent after it said U.S. and European government stimulus packages would boost the construction industry next year. [ID:nLK96614]

The FTSE 100 <.FTSE> rose 1.4 percent to 4,756.58, while the pan-European FTSEurofirst 300 <.FTEU3> index of top shares also closed 1.4 percent higher at 944.94 points.

The U.S. earnings picture was mixed as packaged food makers H.J. Heinz Co and Hormel Foods Corp both beat Wall Street estimates, but retailer Sears Holding Corp posted a surprise loss, sending its shares down 10 percent.

"We had strong gains last night in Asia, strong gains in Europe ... so it looks like global money is flowing back into stocks," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

The Dow Jones industrial average <.DJI> was up 46.63 points, or 0.5 percent, at 9,325.79. The Standard & Poor's 500 Index <.SPX> climbed 8.25 points, or 0.8 percent, at 1,004.71. The Nasdaq Composite Index <.IXIC> rose 14.32 points, or 0.7 percent, at 1,983.56.

Oil prices reversed course after early gains to fall from a seven-week high as the rise in new U.S. jobless claims outweighed a drop in U.S. crude inventories. [ID:nN20408369]

U.S. crude for September delivery , which expires on Thursday's close, was down 42 cents at $72.00 a barrel after reaching $72.88, its highest level since June 30.

"It's expiration day volatility and the market is trying to decide if October crude should be at what would be a new 2009 high price at the roll over," said Phil Flynn, analyst at PFGBest Research in Chicago.

The dollar was up 0.1 percent at 94.13 yen after hovering in a tight 93.86 to 94.55 range. The euro was little changed at $1.4230 , off a $1.4256 session peak, and at 134.00 yen.

Sterling was down 0.3 percent at $1.6479 after weak data on British public finances underscored concern about the country's fiscal situation.

Gold was steady near $940 an ounce, with fears over industrial and jewelry demand curbing appetite.

Spot gold was bid at $940.15 an ounce at 1515 GMT, against $940.95 an ounce, after rising as high as $945.60.

September Bund futures settled at 122.52, down 15 ticks from Wednesday's settlement close but were little changed versus the official close.

The 10-year note was trading unchanged in price for a yield of 3.46 percent, while two-year notes were 1/32 lower in price to yield 1.02 percent.

The Chinese snap-back boosted Asian stocks. Japan's Nikkei average <.N225> ended 1.8 percent higher, while the MSCI benchmark of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> gained 1.3 percent. (Reporting by Edward Krudy, Steven C. Johnson, Joshua Schneyerand Chris Reese in New York; Joanne Frearson and Ian Chua in London; writing by Herbert Lash; Editing by Leslie Adler)