GLOBAL MARKETS-World stocks, euro rise on recovery hopes

* World stocks up on economic hopes, recovery from lows

* Euro rises for 5th straight session

* U.S. Treasuries, gold fall as risk appetite picks up (Updates to U.S. markets, changes byline, dateline, previous LONDON)

By Manuela Badawy and Jeremy Gaunt

NEW YORK/LONDON, June 14 (Reuters) - World stocks rose more than 1 percent on Monday to their highest in over a week and the euro firmed from recent four-year lows as investors' risk tolerance rose and euro zone industrial output data surged.

Safe-haven U.S. Treasuries and gold prices eased as appetite for risky assets picked up, while oil rose more than 2 percent lifted by global risk appetite as optimism about economic recovery improved.

A tentative equity rally since late May has lifted world stocks by around 6 percent from their lows. The index <.MIWD00000PUS> was up 1.2 percent.

Similarly, MSCI's main emerging market stock index <.MSCIEF> has gained more than 9 percent since hitting a year low on May 25. It was up 1.6 percent Monday.

While markets were spooked a week back by U.S. data showing weak growth in private sector job creation, strong economic data from China has reinforced a belief that the world recovery is indeed gaining traction.

U.S. stocks were in positive territory boosted by technology and industrial shares as European industrial production in April surged year-on-year more than in any month in almost two decades. For more see [ID:nLDE65D0YC].

The Dow Jones industrial average <.DJI> was up 56.68 points, or 0.56 percent, at 10,267.75. The Standard & Poor's 500 Index <.SPX> was up 6.89 points, or 0.63 percent, at 1,098.49. The Nasdaq Composite Index <.IXIC> was up 22.80 points, or 1.02 percent, at 2,266.40.

"Consumer sentiment is better (and) we're just a few weeks away from the Q2 reporting season, for which the indications are very healthy for the market," said Christian Stocker, strategist at UniCredit Global Research, in Munich. "We have more positive than negative news, and there is a lot of short covering."

Part of the current rally is due to this year's sell-off -- world stocks are down 6 percent year to date and 8.2 percent for the second quarter -- but it is also the result of a belief among many investors that the underlying economic backdrop is relatively positive and that will support corporate earnings.

David Buik, senior partner at BGC partners in London, said the wave of risk aversion in May had left shares a bit "oversold."

"Second quarter earnings will be somewhat better than people expect and there may be just a little bit of mileage left in the current rally," Buik said.

The pan-European FTSEurofirst 300 <.FTEU3> was up 0.9 percent to a four-week high after strong euro zone industrial output rekindled optimism over the bloc's economic outlook.

The rally was driven by banking, mining and commodity stocks, all of which tend to gain when economic sentiment is on the plus side.

A slight easing in worries over the euro zone crisis helped the banking sector, with leading banks Barclays, HSBC, Societe Generale and Deutsche Bank rising 0.9 to 2.6 percent.

Earlier, Japan's Nikkei stock index <.N225> closed up 1.8 percent, driven higher by exporters, again a group with a high correlation to economic growth.

"What is helping the market is the notion that a double dip recession is not a big risk," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin. "I think that is what the markets are latching onto."

EURO RISE

The euro rose broadly as gains in global stock markets lifted risk appetite and prompted traders to pare back bets against the euro zone single currency. The euro moved further away from a recent four-year low to trade above $1.2250 -- its highest in more than a week.

The euro has risen more than 2.4 percent over the past five trading sessions but is still down around 15 percent year to date.

Overall, however, negative sentiment about the euro, prompted by fears about euro zone debt and the economic cost of cutting it, remained, with analysts ascribing the streak of gains to the market's pro-risk mood.

U.S. Treasuries and gold prices eased as improving appetite for assets seen as higher risk, such as equities and the euro, led to receding interest in U.S. government bonds and the precious metal as a safe haven.

The benchmark 10-year U.S. Treasury note was down 19/32 in price, with the yield at 3.31 percent. The 2-year U.S. Treasury note was down 1/32, yielding 0.76 percent. The 30-year U.S. Treasury bond was down 1-7/32 to yield 4.23 percent.

Crude oil rose $1.91, or 2.59 percent, to $75.69 per barrel, while spot gold fell $2.05, or 0.17 percent, to $1223.80 an ounce. (Additional reporting by Wanfeng Zhou in New York and Brian Gorman in London; Editing by James Dalgleish)