* European stocks post biggest 1-day gain since July
* Gold hits record above $1,200 an ounce as dollar slides
* Oil rises more than $1 a barrel on upbeat China outlook
* Bonds fall as receding Dubai fears halt safe-haven rally (Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Dec 1 (Reuters) - Global stocks surged and oil edged higher on Tuesday amid upbeat economic news and fading fears Dubai's debt woes would reignite the credit crisis.
The Dow climbed to its highest close in 14 months and European stocks posted their biggest single-day gains since July 15 as data reassured investors about the battered U.S. housing market, considered key for a healthy economy. For details, see [ID:nN01514125][ID:nGEE5B01VK][ID:nN01500950]
Gold settled above $1,200 an ounce in New York and copper rose to a 15-month high as positive news from China, a weaker U.S. dollar and easing fears of Dubai default contagion overshadowed a mixed batch of U.S. economic data. [ID:nGEE5B00XJ][ID:nGEE5B00QB].
Crude oil climbed above $78 a barrel, lifted by the weaker dollar and news China is ending the year on a strong note, laying the foundations for solid expansion in 2010. [ID:nSYD399937][ID:nPEK127087].
Dubai World's plans to restructure about $26 billion in debt soothed investors' nerves, suggesting the state-controlled company's problems can be contained. [ID:nGEE5B0041].
"What doesn't kill you makes you stronger in this environment," said David Kelly, chief market strategist at JPMorgan Funds Management Inc in New York. "The probable is the economy recovers and is going to push stocks higher."
Investors' attention had returned to focus on the outlook for the world economy, he said. "The numbers that we are seeing are absolutely consistent with a global economic recovery."
Only three companies in the 30-stock Dow fell, and advancing issues outpaced declining issues by almost 4 to 1 among shares listed on the New York Stock Exchange.
The Dow Jones industrial average <.DJI> closed up 126.74 points, or 1.23 percent, at 10,471.58. The Standard & Poor's 500 Index <.SPX> rose 13.23 points, or 1.21 percent, at 1,108.86. The Nasdaq Composite Index <.IXIC> added 31.21 points, or 1.46 percent, at 2,175.81.
The economic data and better Dubai outlook boosted risk appetite and lifted banks and commodity stocks.
Banks led the rally, having been hit by worries over exposure to Dubai.
Data showed pending sales of previously owned U.S. homes rose more than expected to their highest level in 3-1/2 years in October. The Dow Jones home construction index <.DJUSHB> gained 1.3 percent. [ID:nN01495024]
While questions remain about the strength of the recovery, the U.S. manufacturing sector grew for the fourth straight month in November, though at a slower pace. [ID:nN01398224]
The euro zone's manufacturing sector grew in November for the second straight month, but at a faster rate than expected. Car sales data for the month suggested a strong year end in major European markets. [ID:nGEE5B00M0][ID:nGEE5B01HP].
The FTSEurofirst 300 <.FTEU3> index of top European shares rose 2.6 percent to close at 1,011.06 points.
Business surveys in China showed the world's second-largest energy consumer has largely recovered from the global economic downturn, giving crude oil a boost.
"China's manufacturing data was supportive and the weak dollar is also supporting commodities," said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York.
U.S. crude for January delivery
U.S. gold futures gained 1.5 percent as a dollar decline and rising risk appetite fueled metal demand. [ID:nN01512113]
Gold for February delivery
The dollar slid after an interest rate hike in Australia and the yen weakened broadly after the Bank of Japan announced more monetary policy easing.
The U.S. Dollar Index <.DXY> was down 0.63 percent at 74.411.
The euro
U.S. government bond prices fell, pulling benchmark yields up from recent eight-week lows. [ID:nN01508890]
The benchmark 10-year U.S. Treasury note
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> rose 0.9 percent, and the Nikkei <.N225> rallied 2.4 percent on hopes for more growth boosting measures. (Reporting by Caroline Valetkevitch, Gertrude Chavez-Dreyfuss, Edward McAllister and Burton Frierson in New York; Brian Gorman, Harpreet Bhal, Jan Harvey, Pratima Desai and Maytaal Angel in London; writing by Herbert Lash; Editing by Andrew Hay)
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