Stocks gain on Greece hopes, dollar up on U.S. data

NEW YORK (Reuters) - Global equity markets rose on Thursday on optimism Greece would accept an aid-for-reforms deal and on strong U.S. retail sales, which lifted the U.S. dollar and bolstered expectations the Federal Reserve will raise interest rates this year.

U.S. retail sales rose 1.2 percent in May after an upwardly revised 0.2 percent gain in April, the Commerce Department said, as households boosted purchases of automobiles and other goods.

While other U.S. data showed a slight increase in new applications for unemployment benefits, the number remained in territory associated with a tightening labor market.

"The retail sales is just another piece of the economic puzzle and one that investors have been waiting for," said Art Hogan, chief market strategist at Wunderlich Securities in New York. "The Fed will definitely get one rate hike under its belt this year, and another one next year."

European shares rose, with the automobile sector gaining on upbeat forecast from Daimler while Greek shares rallied 8.2 percent on renewed expectations of a resolution to its debt woes.

MSCI's all-country stock index rose 0.11 percent, while the pan-European FTSEurofirst 300 index rose 0.74 percent to 1,560.23.

Stocks on Wall Street rose but remained in a months-long trading range.

"The choices for a lot of people remain stocks or bonds, and the resilience of stocks, even as rates have risen at least in the short run, has given people confidence that it's the better place of the two to be," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

The Dow Jones industrial average rose 57.15 points, or 0.32 percent, to 18,057.55. The S&P 500 gained 4.69 points, or 0.22 percent, to 2,109.89 and the Nasdaq Composite added 9.60 points, or 0.19 percent, to 5,086.29.

The dollar rebounded from three weak days, gaining as much as 1.1 percent against the yen after posting its biggest single-day drop in six months against the Japanese currency Wednesday.

The dollar last traded at 123.67 yen, up 0.83 percent on the day, and was up 0.94 percent against the euro at $1.1218. The dollar index rose 0.69 percent.

U.S. Treasuries yields neared session lows after comments from an International Monetary Fund spokesman that raised doubts that Greece was close to a deal to avert default, spurring safe-haven demand for U.S. government debt.

The yield on benchmark 10-year Treasuries was last at 2.4422 percent, down 10/32 in price. Earlier, the 10-year yield hit a seven-month high of 2.500 percent.

Italian, Irish and Spanish bond yields fell after investors hunting for bargains following a recent sell-off bought more than 12 billion euros of debt at auctions in Rome, Dublin and Madrid.

The rest of the European bond market also rallied as investors returned to debt as bets on a prolonged period of deflation were reversed.

Yields on German 10-year bunds, the benchmark for euro zone borrowing costs, fell 12 basis points to 0.89 percent.

Oil prices declined further due to a stronger dollar and a gloomy economic forecast by the World Bank, while a bullish International Energy Agency (IEA) report on global demand failed to dispel concerns over a supply glut.

Brent crude oil for July shed $1.03 to trade at $64.67 a barrel. U.S. crude was down $1.02 at $60.41 a barrel.

(Editing by Bernadette Baum)