Equities, yields rise as U.S. data shows economy gaining momentum

By Chibuike Oguh

NEW YORK (Reuters) -World equity markets and U.S. Treasury yields rose on Thursday as better-than-expected jobless claims data and a positive report on first-quarter gross domestic product showed that economic recovery is gathering steam.

The number of Americans filing new claims for unemployment benefits dropped to 406,000 for the week ended May 22, according to the U.S. Labor Department, as layoffs subsided, with companies desperate for workers to meet surging demand unleashed by a rapidly reopening economy.

That was the lowest since mid-March 2020 and kept claims below 500,000 for three straight weeks. Economists polled by Reuters had forecast 425,000 applications for the latest week.

A separate report from the Commerce Department on Thursday confirmed economic growth accelerated at a 6.4% annualized rate last quarter, thanks to the massive fiscal stimulus.

The data, which was unrevised from the estimate reported last month, was the second-fastest GDP growth since the third quarter of 2003.

Benchmark 10-year Treasury yield rose to 1.6028% from 1.574% late on Wednesday.

"This is the first time that continuing jobless claims beat expectations and it shows that more people are starting to go back to work and this is very positive for the economy," said Thomas Hayes, managing member at Great Hill Capital.

The MSCI world equity index rose 0.05% to 708.87. Europe's broadest stock index gained 0.27%, driven by industrials, financial and basic materials sectors.

On Wall Street, the benchmark S&P 500 and Dow closed higher with financial, industrials and consumer discretionary stocks making the most gains. The Nasdaq index ended lower, weighed down by weakness in tech shares including Apple Inc and Microsoft Corp.

The Dow Jones Industrial Average rose 0.41% to 34,464.64, the S&P 500 gained 0.12% to 4,200.88 and the Nasdaq Composite dropped 0.01% to 13,736.28.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan clawed back losses to trade flat, just below Wednesday's near-two week high.

Multiple Federal Reserve officials made comments this week to calm inflation worries and signal a possible start to talks to end the central bank's bond buying program.

Vice Chair Richard Clarida said this week recent inflation pressures would "prove to be largely transitory," though he added that policymakers will be at a point to begin discussing tapering in upcoming meetings.

The Fed Vice Chair for supervision, Randal Quarles, suggested that at some stage it will become important for the U.S. central bank to discuss plans to tighten its asset purchase programme.

The dollar index traded in a narrow range on Thursday as traders still looked toward an upcoming inflation report closely watched by Federal Reserve. The index was down 0.075%.

Safe-haven gold was little changed on Thursday, weighed down by the upbeat U.S. data that showed a recovery was on track, while rising Treasury yields further added pressure.

Spot gold rose 0.01% to $1,896.6906 per ounce, having steadied below the key psychological $1,900 level.

Oil prices rose on Thursday, bolstered by strong U.S. economic data that offset investors' concerns about the potential for a rise in Iranian supplies. [L2N2NE098]

Brent rose 59 cents, 0.9%, to settle at $69.46 a barrel. U.S. West Texas Intermediate (WTI) crude rose 64 cents, or 1%, to settle at $66.85 a barrel.

(Reporting by Chibuike Oguh in New York, Editing by William Maclean and Matthew Lewis)