GLOBAL MARKETS-U.S. housing data boosts stocks, oil

* U.S. new home sales boost stocks, risk appetite

* Euro up versus dollar on upbeat European data

By Manuela Badawy

NEW YORK, July 26 (Reuters) - Stocks rose on Monday after U.S. data showed a pick-up in new home sales, reviving hopes for improvement in a tepid economic recovery, while the euro firmed against the dollar on increased risk tolerance.

The euro also received a boost as investors reacted to the results of bank stress tests released by the European Union late on Friday.

Sales of single-family homes in June jumped 23.6 percent, the largest increase since May 1980, from the prior month's record low, pushing U.S. Treasury prices lower and supporting oil prices. For details, see [ID:nN23137243]

"There was a big revision down in the prior month, but then obviously a rebound this month. We're still at these trough levels, which we've been bouncing along. It's a good sign that we did see an increase after the tax credit expired. Michael O'Rourke, chief market strategist, at BTIG LLC, New York.

O'Rourke referred to an Obama administration initiative to stimulate the economy by giving a tax break to U.S. home buyers, but the provision has now expired.

The Dow Jones industrial average <.DJI> was up 65.47 points, or 0.63 percent, at 10,490.09. The Standard & Poor's 500 Index <.SPX> was up 7.33 points, or 0.66 percent, at 1,109.99. The Nasdaq Composite Index <.IXIC> was up 12.92 points, or 0.57 percent, at 2,282.39.

U.S. stocks also got a lift from FedEx Corp after the bellwether raised its earnings outlook, sending its stock up more than 4 percent. Stronger outlooks for transportation firms like FedEx are seen as a sign of growing economic demand.

European shares turned positive after the release of the U.S. housing data, pushing the pan-European FTSEurofirst 300 <.FTEU3> index of top shares up 0.4 percent at 1,048 points.

World stocks as measured by MSCI <.MIWD00000PUS> were up 0.9 percent and the Thomson Reuters global stock index <.TRXFLDGLPU> gained about 0.9 percent.

After Friday's release of the European bank stress test results, the euro edged higher against the dollar but below its highs as investors speculated the tests weren't strict enough to support a rally in the euro zone single currency.

The euro was up 0.24 percent at $1.2935. Against the Japanese yen, the dollar was down 0.22 percent at 87.25, paring some of its losses after the U.S. housing data.

Investors however, were upbeat about a series of reports in the past week showing the broader European economy was stronger than thought.

Purchasing managers' indexes indicated third-quarter euro zone growth of around 0.6-0.7 percent. German business sentiment also posted a record jump in July to its highest level in three years. And Britain, not in the euro zone, added to the mix with an economy growing twice as fast as expected in the second quarter.

"Despite the market's single-minded focus on the stress tests the more important story was the surprisingly strong economic data from the region (last week)," said Boris Schlossberg, a director for currency research at GFT in New York.

U.S. Treasuries fell after the improvement in new home sales data, with benchmark 10-year notes slipping down 3/32. They yielded 3.02 percent, up from 2.99 percent earlier in the day and 3 percent late Friday.

The 2-year U.S. Treasury note was down 2/32, with the yield at 0.6168 percent. The 30-year U.S. Treasury bond was down 9/32, with the yield at 4.0358 percent.

U.S. crude oil prices turned positive after the economic data having been pressured earlier on Tropical Storm Bonnie's fade.

Oil rose to $79.18 a barrel. The price of gold fell $6.45, or 0.54 percent, to $1182.10, as the metal lost some of its safe-haven appeal, European stress test results, robust U.S. company earnings and vigorous euro zone data cut into gold's appeal. (Additional reporting by Vivianne Rodrigues, Ellen Freilich, Ryan Vlastelica in New York, and Jeremy Gaunt in London; Editing by Kenneth Barry)