* MSCI world equity index up 1.4 pct, at 5-week high
* Yuan hits 5-year high as China allows more flexibility
* Stocks, commodities up; dollar down vs basket (Updates to U.S. markets, changes byline, changes dateline from previous LONDON)
By Manuela Badawy and Natsuko Waki
NEW YORK/LONDON, June 21 (Reuters) - World stocks hit a five-week high, while oil and other commodities jumped on Monday after China made its exchange rate more flexible, easing tensions with the West and boosting confidence in the global economy.
Spot yuan
The euro was flat at $1.2384 per dollar after rising earlier in the day on increased investor appetite for risky assets, spurred by optimism that a global recovery would boost China's buying power abroad.
U.S. stocks rose in late-morning trading as China's vow to allow a flexible yuan invigorated optimism in the global recovery and boosted the outlook for sales in the long term at U.S. multinationals.
"It's totally on the back of China, and miners are the best performers, which shows you where the drive in the markets is coming from. We're also seeing generic higher appetite for risk," said Joshua Raymond, market strategist at City Index in London.
Energy and materials shares led the way up as commodities
advanced. Among U.S.-based multinational companies, Caterpillar
Inc
Coming just days before a Group of 20 summit in Toronto, China's move is expected to boost purchasing power and demand in the world's third largest economy.
A higher yuan would also help temper inflation in China by pushing down import prices, which in turn could mean Beijing would have less need to tighten monetary policy aggressively. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Full yuan coverage [ID:nSGE65J00E]
Unlocking the yuan http://china.thomsonreuters.com/yuan/
Graphic on yuan movements http://r.reuters.com/sut87k
Insider TV
-- Yuan to rise before G20 http://link.reuters.com/jes92m
-- Yuan NDFs overshoot http://link.reuters.com/jup72m ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The Dow Jones industrial average <.DJI> gained 93.64 points, or 0.90 percent, to 10,544.28. The Standard & Poor's 500 Index <.SPX> rose 8.33 points, or 0.75 percent, to 1,125.84. The Nasdaq Composite Index <.IXIC> added 13.27 points, or 0.57 percent, to 2,323.07.
The MSCI world equity index <.MIWD00000PUS> rose 1.2 percent, hitting its highest level since mid-May.
The FTSEurofirst 300 index <.FTEU3> was up 0.7 percent, rising for the ninth straight session to hit a 5-1/2 week peak, with basic resources stocks being the biggest gainers.
Emerging stocks <.MSCIEF> added 2.8 percent to a six-week high, while emerging sovereign debt spreads <11EMJ> tightened 13 basis points to 297 bps, their narrowest in five weeks.
"It's a very large positive in the sense that the next decade of global growth is probably going to be shaped by how well the China consumer develops or doesn't, and obviously this is a step to help that," said Mike O'Rourke, chief market strategist at BTIG LLC in New York.
U.S. crude oil
Copper prices soared on China's pledge and raised hopes of
stronger demand growth from the world's largest consumer of
industrial metals. Benchmark lead
The euro rose to a one-month high near $1.2490 before
easing to $1.2391
Breaking the peg might mean China needs to buy less U.S. dollars in intervention, which would leave it with fewer dollars to buy U.S. Treasuries, but also give it less need to diversify its holdings into currencies like the euro.
The benchmark 10-year U.S. Treasury note