* Global stocks gain traction after upbeat UK data
* U.S. crude oil flat at $71.42; govt bond yields climb
* AXA, SocGen earnings beat forecasts * UK services sector grows at fastest pace in 17 months
(Updates with U.S. outlook, prices)
By Ian Chua
LONDON, Aug 5 (Reuters) - Global stocks clawed back early losses on Wednesday while lower risk government bonds sagged after upbeat economic reports and corporate earnings reinforced views that the worst of the global recession may be over.
But with two major central banks' policy meetings and key U.S. labour data looming, investors mostly held their fire, keeping a rein on the recent equity and commodity markets' rally.
U.S. stock futures pointed to a subdued start on Wall Street, a day after the S&P 500 index ended at a nine-month closing high above 1,000 for a second day running.
Data showing British services sector unexpectedly surged in July to grow at its fastest pace in more than a year underpinned hopes the global economic recession may be losing its grip.
In the euro zone, the deep slowdown in the services sector eased in July further supporting the recovery theme, although retail sales in June fell unexpectedly.
"The data surprised on the upside which is good news for the UK economy as it indicates we're in for a slow grind of recovery rather than a rapid contraction," said Peter Dixon, economist at Commerzbank.
MSCI's main world stock index recovered from an early fall to be a touch firmer on the day at 271.84, not far off a 10-month peak of 272.33 hit the previous session. The index has gained nearly 60 percent since plumbing a trough in March.
European share markets rose with the FTSEurofirst 300 index of top regional shares advancing 0.5 percent. London's FTSE also gained 0.5 percent. Earlier, Japan's Nikkei average fell 1.2 percent.
Financial stocks led the rise after AXA, Europe's second-biggest insurer by market capitalisation and French bank Societe Generale posted results that beat forecasts, sending their share prices up more than 5 percent. and
Among commodities, U.S. crude oil traded at $71.40 a barrel, not far off the recent high above $72 and copper was at $6,133 a tonne, having earlier hit a new 10-month peak of $6,151.
While the European Central Bank and Bank of England are widely expected to keep interest rates at record lows of 1.0 percent and 0.5 percent respectively on Thursday, investors are keen to see if both central banks will sound more upbeat about the outlook and whether further stimulus measures will be added.
The recent string of upbeat data, however, may keep the BoE from expanding its stimulus programme, some analysts said. Reflecting that view, interest-rate sensitive short sterling futures fell across the 2010 strip, pushing implied yields higher.
Ahead of the U.S. non-farm payrolls report on Friday, investors will get a reading of U.S. private sector employment as well as the U.S. services sector for July later in the day.
DOLLAR STEADIER
The dollar was steadier against a basket of major currencies having plumbed a 10-month low this week as improving risk appetite drove investors in search of higher yielding currencies such as the Australian dollar.
"Data today has the capability to spur a spike lower, but we suspect it will be difficult to extend things in a sustained way with key events such as meetings at the BoE and ECB, and non-farm payrolls looming," said Daragh Maher, deputy head of global foreign exchange strategy at Calyon.
"Instead, the market would likely prefer a pause and some consolidation before embarking on a renewed attempt to drive new levels."
The dollar index was a touch lower on the day at 77.651. Against the yen, the dollar was little changed at 95.26 yen, while the euro edged up 0.1 percent to 137.34 yen. The euro edged up 0.1 percent versus the dollar to $1.4414.
Sterling was a clear winner, rising 0.6 percent to $1.7034.
Lower-risk assets such as government bonds erased earlier gains and fell on the back of the upbeat data, pushing yields higher.
The euro zone's benchmark 10-year Bund yield rose 3 basis points on the day to 3.386 percent, while the equivalent U.S. yield climbed 3 basis points to 3.720 percent.
"The UK data suggests recovery may already be underway," said Nick Stamenkovic, bond strategist at RIA Capital.
"That's knocked the gilt market and has dragged Bunds down as well, particularly at the short-end as the market worries that the Bank of England will start tightening sooner than the Federal Reserve and European Central Bank." (Additional reporting by Kirsten Donovan and Simon Falush; Editing by Andy Bruce)