Global equity markets and crude oil rose on Monday as investors snapped up riskier assets at the start of a new quarter after data showed U.S. manufacturing expanded in June, while Japanese and European data pointed to stabilizing economies.
U.S. stocks pared about half their earlier gains that had propelled the major indexes more than 1 percent higher after the Institute for Supply Management said its index of national factory activity rose to 50.9 in June from 49.0 in May. That was a touch above the expected 50.5 level.
Investors sold to lock in recent gains, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
"We've had a couple days of pretty good moves, and on Friday and today you've had some intraday profit taking. But I haven't seen anything specific that would cause people to sell," he said.
Stocks rose in Europe as business surveys showed the euro zone's prolonged economic decline may have stabilized in June and even rebounded in some areas, while British manufacturing grew at its fastest pace in more than two years.
A move from bonds into stocks as the new quarter begins could be behind the strength that equities showed even before the release of the U.S. data, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
"People saw ISM was stronger and slightly higher than consensus and decided to run with it," Forrest said.
U.S. equities built on the strongest first half since 1998 as concerns eased further that the Federal Reserve would soon reduce its bond-buying policy aimed at spurring economic growth.
Gains this year have been enhanced by the Fed's policy, which helped push major U.S. indexes to record highs before recent comments by Fed Chairman Ben Bernanke sparked doubts over when the U.S. central bank will start to reduce its support.
MSCI's all-country world equity index .MIWD00000PUS rose 0.72 percent as it bounced back from its first quarterly loss since the same period of 2012.
The Dow Jones industrial average .DJI closed up 65.36 points, or 0.44 percent, at 14,974.96. The Standard & Poor's 500 Index .SPX rose 8.68 points, or 0.54 percent, at 1,614.96. The Nasdaq Composite Index .IXIC added 31.24 points, or 0.92 percent, at 3,434.49.
In Europe, the broad FTSEurofirst 300 .FTEU3 of leading regional companies rose 0.99 percent to close at 1,163.58.
Investors brushed off signs of a slowdown in China, where the official purchasing managers' index showed factory growth stalling last month. A similar private survey offered a bleaker picture and showed manufacturing activity tumbled to a nine-month low.
Crude oil rose amid a broad rally in commodities.
In London, Brent crude gained 84 cents a barrel to settle at $103.00. U.S. crude rose $1.43 to settle at $97.99 a barrel.
Some in the market questioned the day's surge.
"Markets have been going back and forth, but it looks like a relief rally after everyone over-reacted to Bernanke's comments," said Uri Landesman, president of Platinum Partners in New York.
Copper rose in a rebound from a low last week, helped by a weaker dollar, but concerns linger about the outlook for demand after the data on Chinese manufacturing.
Markets are sensitive to U.S. data because it will shape the timetable for the Fed to taper its $85 billion a month in asset purchases, which have driven interest rates to record lows and supported stocks, bonds and commodities worldwide.
"The news out of Europe was the first tangible proof of improving economic activity in the periphery economies and indicates that the region may be finally starting to turn toward growth as the summer progresses," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
The dollar fell against most currencies, while the yen dropped to its lowest in nearly four weeks versus the greenback as the better-than-expected economic data from Europe and Japan lifted risk sentiment.
The euro was up 0.42 percent at $1.3063, recovering after a dip last week to $1.2983, its lowest since early June.
The dollar was up 0.49 percent at 99.61 yen.
U.S. Treasuries prices rebounded after the ISM manufacturing index's employment index slipped in June, fueling speculation in the bond market that the Fed could keep its bond-buying program in place to support the labor market.
The unemployment rate is a key metric the Fed will use to judge when to pare back its asset-purchase program.
The benchmark 10-year U.S. Treasury note was up 3/32 in price to yield 2.4765 percent.