GLOBAL MARKETS-Weak US data ignored by stocks, embraced by bonds

* U.S. stocks rise, led by Wal-Mart, financials

* U.S. retail sales, jobless claims disappointing

* German, French return to growth boosts Europe shares

* Government bond yields drop on weak U.S. data

* U.S. dollar weaker, commodities rise (Updates with New York market close, comment)

By Daniel Bases

NEW YORK, Aug 13 (Reuters) - U.S. stocks shook off some disappointing economic data and losses on Thursday to keep a global rally alive after Germany and France reported economic growth in the second quarter, sending share prices higher.

Commodity prices rose while the U.S. dollar lost ground to the euro after the better-than-expected gross domestic product data, although overall the euro zone still remained just in recession during the second quarter, its GDP falling 0.1 percent. For more see [ID:nLD331672].

American consumers pulled their purse strings tighter in July, making retail sales fall 0.1 percent, although upbeat earnings from the world's biggest retailer, Wal-Mart Stores Inc , helped lift U.S. stocks. [ID:nN13399911]

U.S. stocks closed near their highs as the rebound gained strength as the trading day wore on. The Dow Jones industrial average <.DJI> gained 0.4 percent while the Standard & Poor's 500 Index <.SPX> rose 0.7 percent and the Nasdaq Composite Index <.IXIC> ended 0.5 percent higher at the end of the day.

"What really helped us this morning was Wal-Mart coming out and kind of across the board saying early back-to-school numbers were pretty good," said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas.

"That kind of keyed the market, at least having some resiliency and some support, and consequently we've rallied just a little here," Simpson said.

Analysts had expected retail sales to rise as a result of the government "cash for clunkers" program, which gives consumers cash to swap aging gas-guzzlers for new, more fuel-efficient models.

The disappointing sales data combined with a rise in weekly U.S. jobless claims to revive investor concerns about the vigor of any economic recovery and sent U.S. Treasury prices higher. [ID:nN13227479]

On Wednesday the Federal Reserve said the trajectory of the U.S. downturn was leveling off but sluggish income growth and continued job losses were constraining consumer spending.

Financial stocks were among the winners on Thursday.

In U.S. trade, Bank of America Corp rose 6.7 percent to $17 on news that hedge fund manager John Paulson, who made a fortune betting against financial companies after foreseeing the credit crisis, had stocked up on the bank's shares during the second quarter. [ID:nN12401520]

In European trade, shares of Swiss banking giant UBS rose 5.4 percent as investors expected the settlement of a damaging U.S. tax dispute to allow the bank to focus on becoming profitable again. [ID:nN1296068]

STOCKS RALLY EXTENDS

World stocks as measured by MSCI <.MIWD00000PUS> reached a fresh 10-month high, up over 1.2 percent on the day and up 17 percent since mid-July.

Japan's Nikkei share average <.N225> rose 0.8 percent, driven by big auto exporters and tech shares.

Europe's benchmark FTSEurofirst 300 <.FTEU3> index rose 0.7 percent but fell from an earlier 9-month high.

The markets rallied after Germany and France, the euro zone's two biggest economies, both reported 0.3 percent second- quarter growth, ending their recessions earlier than expected.

"The improving figure for euro zone GDP is relatively good news, but it's too early to declare victory," said Marc Touati, chief economist at Global Equities in Paris.

The euro gained 0.6 percent at $1.4283 after rising to $1.4327, its best level in a week, while the dollar fell 0.8 percent to 95.33 yen .

Against a basket of major trading-partner currencies, the U.S. Dollar Index <.DXY> dropped 0.5 percent as investors switched to riskier assets such as commodities after the Fed's statement that the U.S. economy was reaching a trough.

"Looking forward, markets will pay very close attention to consumer behavior to test the sustainability of this recovery," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

Copper prices reached fresh 10-month highs while crude oil prices rose 99 cents to $71.15 a barrel. Spot gold rose $8.10, or nearly 0.9 percent, to $954.15.

U.S. Treasuries prices surged on the U.S. data, while a well received $15 billion auction of 30-year Treasury bonds, the last leg of a record $75 billion quarterly refunding, helped extend those gains.

The benchmark 10-year Treasury note's yield fell to 3.61 percent from 3.72 percent on Wednesday. The 30-year Treasury bond yield dropped to 4.44 percent from 4.54 percent in the prior session.

European government bond yields also fell after the weaker-than-expected U.S. data. Ten-year Bunds yielded 3.431 percent , off about three basis points, while interest rate-sensitive two-year Schatz yields were four basis points lower at 1.411 percent . (Additional reporting by Angela Moon, Richard Leong, Nick Olivari and Chuck Mikolajczak in New York; Lucia Mutikani in Washington; Nicole Maestri in San Francisco; Blaise Robinson in Paris and Ian Chua, Joe Brock and Kirsten Donovan in London; Editing by James Dalgleish)