* China's factories expand at best pace in seven months
* Euro gains as bearish dollar sentiment persists
* U.S. bond yields bounce off 3-month lows as rally pauses
* Wall St gains as Fed hopes offset mixed earnings
By Angela Moon
NEW YORK, Oct 24 (Reuters) - Global equity markets resumedtheir recent upward trend on Thursday, boosted by signs ofgrowth in China's manufacturing sector, while the dollar fell toa two-year low on expectations for a steady accommodativemonetary policy from the Federal Reserve.
The S&P 500 index ended higher, locking in the benchmark's10th session of gains in the past 12 as investors shrugged off amixed batch of earnings and economic data.
"You've got this underlying liquidity surge that's proppingprices up, and earnings season hasn't been poor," said BuckyHellwig, senior vice president at BB&T Wealth Management inBirmingham, Alabama.
The dollar was pressured, hitting a nine-month low against abasket of currencies on growing expectations the Fed will notshrink its bond-purchase program until next year. The greenbackwas last down 0.1 percent against a basket of currencies.
The euro shrugged off disappointing data showing the pace ofgrowth in euro zone business eased this month. Talk of heavybuying by central banks in Asia also boosted the currency.
The euro rose 0.2 percent to $1.3803, having hit ashigh as $1.3825, according to Reuters data, its strongest sinceNovember 2011.
Data showing growth in China's vast factory sector reached aseven-month high this month also fed investors' appetite forrisky assets and eased concerns about a slowdown in Chineseexports, which would point to weakening global demand.
But U.S. manufacturing output fell for the first time infour years while the euro zone economy lost momentum, surveys showed, suggesting the world economy is still facing speed bumpsas China tries to rebound from a slowdown and as growth inadvanced economies remains fragile.
In a heavy day of U.S. earnings reports, 47 S&P 500 components including Microsoft Corp and Amazon.com Inc reported results on Thursday.
Third-quarter earnings overall have brought disappointments,including some weak outlooks. Just 53 percent of companies sofar have beat analysts' revenue expectations, below thelong-term average, according to Thomson Reuters data.
U.S. Treasuries yields edged up from three-month lows asbuying on views the Federal Reserve will not shrink itsbond-purchase program until next year faded.
Benchmark 10-year Treasuries traded down 8/32 inprice to yield 2.514 percent, up 3 basis points from late onWednesday. The 10-year yield fell to a three-month low of 2.471percent on Wednesday.
Fed policy is seen as very data-dependent, though economicindicators over the coming months are likely to be skewed by theeffects of the government shutdown. That could limit insight on the state of the U.S. economy and to what degree the shutdownand the fight over raising the debt ceiling harmed growth.
On Wall Street, the Dow Jones industrial average ended up 95.88 points, or 0.62 percent, at 15,509.21. TheStandard & Poor's 500 Index was up 5.69 points, or 0.33percent, at 1,752.07. The Nasdaq Composite Index was up21.89 points, or 0.56 percent, at 3,928.96.
European shares recovered their poise, climbing back towardfive-year highs on strong corporate results and the encouragingmanufacturing data from top metals consumer China.
The pan-European FTSEurofirst 300 index rose 0.5percent to 1,285.89, recovering from the previous session's falland climbing back toward Tuesday's five-year highs of 1,291.93.
MSCI's world equity index added 0.3 percent,partially retracing losses of 0.6 percent on Wednesday, whenmarkets were rocked by fears that a spike in Chinese short-termrates could hurt growth.
In commodities trading, spot gold rose 1.4 percent to$1,350.06 an ounce, having earlier hit $1,351.61, its highestsince Sept. 20.
The U.S. crude oil benchmark snapped three sessionsof losses and ended the day 25 cents higher at $97.11 a barrel,after touching a four-month low of $95.95. Brent crude oil ended 81 cents lower to $106.99 a barrel, a freshtwo-month settlement low.
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