By Jeremy Gaunt, European Investment Correspondent
LONDON, July 1 (Reuters) - World stocks began the third quarter on an upbeat note on Wednesday with European and emerging market shares rising around 1 percent and oil climbing on hopes for a recovery in demand.
New York crude was up more than $1 near $71 a barrel.
Oil prices, which had tumbled from a record high of over $147 struck in July last year, have rallied in recent months on a weak dollar and hopes of a global economic recovery to chalk up a 42 percent gain in the last quarter -- the highest quarterly gain since 1990.
Equities, meanwhile, had a record quarter with MSCI's all country index gaining 22.2 percent over the three months, the most since the index was compiled in 1988.
"More and more evidence is accumulating to suggest that the decline in economic activity is coming to an end," Barclays Wealth said in a note.
It advised its clients to increase risk in their portfolios, mainly by adding to equity holdings but also in commodities.
European shares were boosted by energy and banking stocks.
The FTSEurofirst 300 was up 1.2 percent, helping add a third of a percent to the MSCI index. Emerging market stocks were up 1 percent.
Emerging markets were among the big winners of the past quarter. The MSCI sub-index for the sector gained 33.6 percent.
Investors appear to be increasingly confident in global recovery. Reuter asset allocation polls for June showed cash reserves at a 23-month low, a sign that money is being put to work.
But they are also keen to see more concrete signs of economic revival before becoming fully persuaded.
Euro zone manufacturing activity contracted less than initially thought in June but sharp differences between countries supported evidence from Asia and the United States that broad recovery would be slow.
DATA AWAITED
The euro inched up, supported by the higher European shares but not very moved by the manufacturing report.
Investors were also eyeing a policy announcement by the European Central Bank on Thursday, as well as U.S. non-farm payrolls, which will be scrutinised to gauge whether the deterioration in the U.S. jobs market is starting to stabilise.
The dollar was little changed against a basket of currencies.
The euro was up close to 0.2 percent on the day at $1.4056.
The dollar index which tracks its performance against a basket of currencies, was essentially flat.
Euro zone government bond yields were mixed with the 10-year slightly above at 3.4 percent.
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