GLOBAL MARKETS-Stocks surge on U.S corporate results, bonds fall

* European shares rebound despite regional earnings drag

* Upbeat German and U.S. economic reports force bonds lower

* Oil rises above $85 a barrel on Saudi supply cut (Adds U.S. market open, byline, changes dateline; previous LONDON)

By Herbert Lash

NEW YORK, Oct 23 (Reuters) - Global equity markets rose on Thursday, with stocks on Wall Street surging more than 1 percent as U.S. corporate results continued to beat expectations, while government debt prices fell on encouraging American and German economic reports.

Caterpillar Inc (NYSE: CAT - news) and 3M Co, both Dow components, reassured investors that multinationals can deliver solid earnings despite concerns about global economic growth.

Shares (Berlin: DI6.BE - news) of Caterpillar, which raised its full-year earnings outlook, rose 4.9 percent, while 3M shares jumped 5.7 percent.

"If we're looking at headwinds like currency and slowing global growth, seeing multinationals like Caterpillar and 3M post solid beats gives us confidence that economic growth is holding on and probably better than the market is currently expecting," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

The surge on Wall Street helped turn around European stocks, which initially fell on weak results from companies including French tire-maker Michelin (Paris: FR0000121261 - news) , despite receiving support from better-than-expected euro zone business activity data.

Michelin was down 4.9 percent.

MSCI (NYSE: MSCI - news) 's all-country world index, which gauges equity performance in 45 countries, rose 0.55 percent, while the pan-European FTSEurofirst 300 of leading regional companies rebounded to be up 0.32 percent to 1,312.96.

The Dow Jones industrial average rose 227.07 points, or 1.38 percent, to 16,688.39. The S&P 500 gained 24.35 points, or 1.26 percent, to 1,951.46 and the Nasdaq Composite added 65.52 points, or 1.49 percent, to 4,448.37.

Bond prices fell. German government bond yields rose after an unexpected uptick in euro zone business surveys staved off fears the bloc could be headed for a triple-dip recession. U.S. Treasury yields climbed to their highest levels in over a week after weekly jobless claims fell to the lowest since late 2000.

Ten-year German Bunds yields rose to 0.886 percent, while 10-year U.S. Treasuries fell 11/32 in price to yield 2.2712 percent.

The dollar recovered against the euro and pushed higher against the yen. The euro initially rebounded from a two-week low, but later fell on the U.S. data, falling 0.1 percent to $1.2635. The dollar rose 0.88 percent to 108.08 yen .

Brent crude oil rose above $85 a barrel on news Saudi Arabia cut its supply to the market in September, even though its overall production grew month on month, and on strong economic data from Europe and China.

OPEC's largest producer pumped 9.7 million barrels per day in September, up from around 9.6 million in August, an industry source said on Thursday.

Brent crude for December was up $1.28 at $85.99 a barrel, after touching a high of $86.30. U.S. front-month crude was up 96 cents at $81.48. (Reporting by Herbert Lash; Additional reporting by Ryan Vlastelica in New York,)