* China's factories expand at best pace in 7 months
* Wall St opens higher, S&P 500 up after snapping four-session winning streak
* Expectations of unchanged Fed policy weigh on dollar, lift gold
By Angela Moon
NEW YORK, Oct 24 (Reuters) - Global equity markets edged higher on Thursday, boosted by signs of growth in China's manufacturing sector, while rising expectations that the Federal Reserve will keep its stimulus efforts in place for months kept U.S. Treasuries yields near three-month lows.
Wall Street opened higher a day after the S&P 500 index broke a four-session winning streak as investors grappled with a host of corporate earnings and muddled economic data.
The low Treasuries yields kept the dollar pressured while helping the euro as the Fed's easy monetary policy outweighed weaker euro zone data. The euro was up 0.3 percent at $1.3816, having earlier hit $1.3824, its strongest level since November 2011, while the dollar fell broadly, hitting a near nine-month low of 79.081 against a basket of currencies.
Fed policy is seen as very data dependant, though economic indicators over the coming month are likely to be skewed by the effects of the government shutdown. That could limit insight on the actual state of the economy and to what degree the shutdown and the fight over raising the debt ceiling harmed growth.
"What we've been seeing since the government shutdown and debt ceiling was resolved is a desire to jump back into Treasuries," said Jason Rogan, managing director in Treasuries trading at Guggenheim Partners in New York.
"Most market participants are of the mind that the Fed is on hold for the foreseeable future."
Treasuries have rallied since data on Tuesday showed employers added fewer jobs than expected in September, stroking fears the economy was slowing, even before the government's 16-day shutdown.
However, on Thursday the benchmark 10-year U.S. Treasury note was down 6/32, its yield at 2.5052 percent.
Data showed activity in China's vast factory sector reached a seven-month high this month, easing concerns about a slowdown in Chinese exports, which would point to weakening global demand.
On Wall Street, the Dow Jones industrial average was up 87.50 points, or 0.57 percent, at 15,500.83. The Standard & Poor's 500 Index was up 4.83 points, or 0.28 percent, at 1,751.21. The Nasdaq Composite Index was up 20.37 points, or 0.52 percent, at 3,927.44.
European shares recovered their poise, climbing back toward five-year highs thanks to strong corporate results and the encouraging manufacturing data from top metals consumer China.
The pan-European FTSEurofirst 300 index was up 0.4 percent at 1,284.89, recovering from the previous session's fall and climbing back toward Tuesday's five-year highs of 1,291.93.
MSCI's world equity index added 0.2 percent, slightly retracing losses of 0.6 percent on Wednesday, when markets were rocked by fears that a spike in Chinese short-term rates could hurt growth.
The U.S. manufacturing Purchasing Managers Index rose at its slowest pace in a year this month and factory output contracted for the first time since late 2009. The survey was conducted partly during the 16-day U.S. government shutdown, which economists expect will slow overall U.S. growth slightly in the last three months of 2013.
Markit's PMI index for the 17-nation euro area showed business activity eased slightly in October after a pick-up in September, though it confirmed that the region's economic recovery was taking root.
U.S. corporate earnings continue to pour in, with 47 S&P 500 components expected to report on Thursday, including Microsoft Corp and Amazon.com Inc after the close of trading.
"The earnings picture was not supposed to be that great this quarter and in fact we are seeing that. The thing that is disappointing is top-line revenue, and those are not good signs," said Keith Bliss, senior vice-president at Cuttone & Co in New York.
"So what is going to drive the market from that point is going to be Washington policy and Fed policy."
In commodities trading, gold was the biggest mover, up 0.4 percent to $1,336.50 an ounce, nearing a four-week high as the outlook for an unchanged Fed policy heightened concerns about inflation risk.
"Postponement of tapering means higher liquidity in the market, probably higher inflation risks in the longer term," Commerzbank analyst Eugen Weinberg said. "That's likely to lead to higher interest in gold."
Brent crude futures slipped 0.5 percent to near $107 a barrel as rising supplies of crude oil in the United States drove prices toward a two-month low, while U.S. crude fell for a fourth straight session to its lowest since June. But the selling was not as heavy as in the previous session.
Brent crude oil was down 49 cents to $107.31 a barrel while the U.S. crude oil benchmark, also known as West Texas Intermediate or WTI, shed 47 cents to $96.49 a barrel.
Copper edged down to its lowest in more than a week as concerns about the current tight credit conditions in China and its impact on demand offset the brighter growth outlook.