By Jamie McGeever
LONDON (Reuters) - World shares and bond yields rose on Wednesday as positive economic data from Australia to the United States calmed fears of a global economic slowdown, although the rally lost momentum in European trade as oil prices reversed direction.
Asian stocks hit a two-month high, Japan's and China's main indices both rose more than 4 percent, and European markets were still in positive territory, putting them on track for their longest winning streak in five months.
Investors shrugged off further signs of weakness in global manufacturing, taking their cue instead from more encouraging indicators, such as U.S. construction spending and Australian and Swiss GDP.
Stocks and investor confidence rose even though expectations rose that the Federal Reserve will raise interest rates later this year , something that hasn't been in evidence much in recent weeks.
"Markets are definitely in a period where good news equals good news, with no immediate concern about what it might mean for, say, Fed expectations," said Jim Reid, market strategist at Deutsche Bank in London.
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The FTSEuroFirst index of leading 300 shares was up 0.2 percent at 1,335 points, on track for its fifth straight day of gains but off its earlier highs.
Germany's DAX and France's CAC were both up 0.2 percent too. Britain's FTSE 100 was down 0.3 percent.
Investors also took heart from announcements by China earlier this week of a cut in bank reserve requirements and structural reforms to the world's second-largest economy.
Japan's Nikkei closed up 4 percent, Hong Kong's HangSeng Index rose 3 percent and China's main markets had their best day so far this year, rising more than 4 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 2.5 percent to its highest levels sinceJan. 7, and building on gains in the previous session.
MSCI's broadest gauge of the world's stock markets also rose to highest level in almost two months.
STIMULUS HOPES
The Institute for Supply Management's index of U.S.factory activity, a closely watched measure of Americanmanufacturing, rose more than expected last month. Italso edged up for two months in a row, apparently ending its almost continuous decline since late 2014.
U.S. construction spending rose to its highest sinceOctober 2007 and solid GDP data from Canada and Australia and Switzerland on Wednesday helped.
The data helped lift the U.S. S&P 500 Index 2.39 percent to an eight-week high of 1,978.35. Stock futures pointed to a lower open on Wall Street.
Even Moody's downgrade of its outlook on Chinese governmentdebt to "negative" from "stable" failed to puncture the renewed sense of cautious optimism. If anything, investors are taking heart from the prospect of more stimulus from Beijing in the coming weeks, as well as the European Central Bank as early as next week.
"The countdown to the ECB meeting begins and the poor inflation and core inflation numbers from the euro zone points to more easing from (ECB president) Mario Draghi," said David Madden, market analyst at IG in London.
Investors unwound bets in safe-haven assets such asgovernment bonds, with the 10-year U.S. Treasuries yield rising to a four-week high of 1.85 percent. The 10-year German Bund yield rose nearly 5 basis points to 0.20 percent, although Germany auctioned five-year bonds at a record low yield of -0.36 percent.
Gold slipped from its recent high to $1,230 an ounce but is still up 16 percent so far this year. Similarly, oil eased back on Wednesday but is till up more than 30 percent from its lows struck just three weeks ago.
Brent crude futures fell 1 percent to $36.48 a barrel, after hitting an eight-week high of $37.25 on Tuesday. U.S. crude futures were down 2 percent at $33.74 a barrel after hitting a one-month high of $34.76 on Tuesday.
The dollar rose to 114.40 yen, recovering further from near 111 last month. The euro was steady near Tuesday's one-month low of $1.08340, under pressure from the expectations the ECB will step up monetary stimulus next week. Markets were also keeping an eye on U.S. "SuperTuesday", where Republican Donald Trump and Democrat Hillary Clinton took big steps toward securing their parties' presidential nominations.
(Reporting by Jamie McGeever; Editing by Larry King)