* Wall St. up, bucking weak New York manufacturing index
* Bargain hunting aids rebound after supportive Japan GDP
* Google bid for Motorola Mobility adds to investor fervor
* Oil prices up nearly 2 pct as risk appetite widens (Recasts and updates throughout with Wall Street's open; changes dateline, previously LONDON)
By Barani Krishnan
NEW YORK, Aug 15 (Reuters) - Wall Street opened higher on Monday, defying an unexpected drop in New York state's key manufacturing index, as investors made a beeline for assets cheapened by last week's rout, including commodities.
World stocks climbed further out of their August hole, after Japan's economy shrank less than anticipated in the second quarter after companies made strides in restoring output following a devastating earthquake and tsunami.
"The Japanese news, while not overly encouraging, was another datapoint showing things are not nearly as bad as the selloff seemed to suggest," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
"This is an extremely jittery market, just looking to avoid significant bad news," he said. "I would expect there to be less volatility than we saw last week."
U.S. stocks opened higher with the Dow Jones industrial average <.DJI> up 108.53 points, or 0.96 percent, at 11,377.55. The Standard & Poor's 500 Index <.SPX> was up 10.77 points, or 0.91 percent, at 1,189.58. The Nasdaq Composite Index <.IXIC> was up 17.36 points, or 0.69 percent, at 2,525.34.
The S&P 500 hit near a one-year low last week as markets tumbled initially on the first-ever U.S. credit ratings downgrade and fears that Europe's debt woes may get out of hand, before rebounding with almost equal force on the notion the selloff was overdone.
Monday's rebound was fueled partly by news that Google Inc
MSCI's all-country world stock index <.MIWD00000PUS>, a broad measure of global equity health, was up 1.5 percent, ratcheting up a 7 percent gain since hitting an 11-month low on Thursday. European stocks <.MSCIEF> rose 2 percent.
In the United States, a gauge of manufacturing in New York State showed the sector contracted for the third month in a row in August as new orders fell to their lowest level since November 2010, the New York Federal Reserve said in a report.
Separate data from the U.S. Treasury Department showed foreigners unloaded U.S. assets in June for a second straight month and were net sellers of Treasury securities for the first time in more than two years as concern about a U.S. credit downgrade soured overseas demand. [ID:nN1E77E0BT]
Among commodities, U.S. crude oil rose up to 2 percent, touching a session peak of nearly $87 per barrel, after trailing equity markets higher.
The dollar's drop against the euro
On the euro zone crisis front, Italian economy minister Giulio Tremonti's call for common euro zone debt issuance was rejected by German Finance Minister Wolfgang Schaeuble, who said such euro bonds would undermine the basis for the single currency by weakening fiscal discipline among member states. [ID:nL6E7JD02L]
German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to meet in Paris on Tuesday to discuss the crisis. Germany said not to expect any breakthrough agreement; France said euro bonds were not on the agenda.
U.S. and core euro zone debt yields were flat.
(Additional reporting by Jeremy Gaunt, Atul Prakash and Blaise Robinson in London, Editing by Chizu Nomiyama)