Dollar, U.S. stocks gain on U.S. GDP data; Gross' Pimco exit hits bonds

NEW YORK (Reuters) - Data showing the U.S. economy grew at its fastest pace in more than two years in the second quarter boosted the dollar and U.S. stocks on Friday while news that high-profile investor Bill Gross is leaving Pimco for a rival firm rattled the bond market.

U.S. stocks bounced back from losses Thursday, when major indexes posted their biggest declines since July 31. The dollar was heading toward an 11th straight week of gains against a basket of currencies. That would extend the longest winning streak since its 1971 free float under President Nixon.

News of Gross' departure also drove down shares of German insurer Allianz , the parent of Newport Beach, California-based Pimco. Gross, one of the bond market's most renowned investors, will be joining Janus Capital Group , Janus said.

Allianz shares tumbled 6.2 percent, wiping roughly 3.75 billion euros ($4.77 billion) from the group's market value. Shares of Janus Capital, up 33.6 percent at $14.84, were on track for their best one-day advance in the stock's history.

U.S. Commerce Department reported the U.S. economy grew at its strongest rate in 2-1/2 years during April, May and June.

The dollar index <.DXY> added 0.4 percent and hit a fresh four-year peak of 85.521.

"Fundamentally we see USD outperformance as one of the strongest G10 stories in the fourth quarter," said Josh O'Byrne, a strategist at U.S. bank Citi. "There is still considerable room before a complete recovery (is in place), but demand for U.S. assets is on the rise."

The dollar has been driven higher by the divergent monetary policy outlooks between the U.S Federal Reserve's contemplating a rate hike and the ECB and Bank of Japan mulling further stimulus.

The Dow Jones industrial average <.DJI> rose 75.36 points, or 0.44 percent, to 17,021.16, the S&P 500 <.SPX> gained 5.63 points, or 0.29 percent, to 1,971.62 and the Nasdaq Composite <.IXIC> added 16.53 points, or 0.37 percent, to 4,483.28.

Shares of Yahoo Inc and AOL Inc jumped, turning sharply higher after Starboard Value LP urged a strategic combination of the companies.

MSCI's global share index <.MIWD00000PUS> was down 0.1 percent, however, while European shares <.FTEU3> ended up 0.3 percent. The MSCI emerging stocks index <.MSCIEF> was down 0.1 percent.

Italian and Spanish 10-year bond yields rose after the news on Gross. Pimco has large investments in euro zone peripheral debt.

Italian 10-year bond yields rose 4 basis points on the day to 2.40 percent, while equivalent Spanish yields rose 5 bps to 2.20 percent. Both remained close to their record lows.

U.S. 10-year Treasury notes were last down 8/32 in price to yield 2.54 percent, from a yield of 2.51 percent late Thursday. The yield hit a session high of 2.55 percent.

The yield difference between 10-year U.S. Treasuries and German Bunds reached its widest in nearly 15 years on Thursday, keeping pressure on the euro.

High bond yields tend to attract more fund inflows as bond investments account for a big chunk of international capital flows.

In the oil market, U.S. oil prices were up 56 cents at $93.09 a barrel. Brent crude was lower and headed for its biggest monthly drop since April 2013 as rising supplies outweighed fears U.S.-led strikes against Islamist militants in Syria and Iraq will disrupt oil production.

(Additional reporting by Chuck Mikolajczak in New York; Emelia Sithole-Matarise in London; Patrick Graham and Blaise Robinson in Paris; Editing by Meredith Mazzilli, Catherine Evans and Dan Grebler)

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