* China exports rise 3.5% y/y vs forecast -15.7%
* Weekly U.S. initial jobless claims reach 3.169 million
* Long-term U.S. yields lifted by tidal wave of new debt
* Turkey's lira slumps to record low
* Oil swings around $30 a barrel
By Marc Jones
LONDON, May 7 (Reuters) - World shares largely shook off data on Thursday showing millions more Americans sought unemployment benefits, with sentiment sustained by stronger than expected Chinese exports.
Initial jobless claims for state unemployment benefits totalled a seasonally adjusted 3.169 million for the week ended May 2, down from a revised 3.846 million in the prior week, showed the Labor Department's weekly jobless claims report.
The data reinforced economists' expectations of a protracted recovery of the economy, which is reeling from nationwide lockdowns to slow the spread of the coronavirus.
Earlier, stocks had been bolstered by Beijing reporting a 3.5% rise in exports in April on a year earlier, confounding expectations of a 15.1% fall and outweighing a 14.2% drop in imports.
The surprise stoked speculation China could recover from its coronavirus lockdown quicker than first thought and support global growth in the process.
The news helped Japan's Nikkei and Seoul's Kopsi shake off early wobbles in Asia, and Europe's main London, Paris and Frankfurt markets extended gains, putting all of them roughly 1% higher.
E-Mini futures for the S&P 500 fared better with a bounce of 1.5%, though there were ominous signs. Turkey's lira fell to a record low amid worries about its dwindling FX reserves, and Italy's bond yields hit 2% again before managing to recover.
"It's clear that this virus has gone from east to west and we are now seeing that in the data," said Societe Generale's Kit Juckes, pointing to the China numbers and relatively better purchasing managing data in countries such as Australia.
But with the full economic impact of COVID-19 still to be seen and huge amounts of debt potentially pushing up borrowing costs, "the market is hugely split between die-hard bears and buy-on-dip buyers", he added.
Markets had traded cautiously overnight with renewed Sino-U.S. tensions lurking in the background.
U.S. President Donald Trump said he would be able to report in about a week or two whether China is meeting its obligations under a trade deal, as Washington weighed punitive action against Beijing over its handling of the coronavirus outbreak.
The flow of economic data also remained grim, with U.S. private employers laying off 20 million workers in April and the Bank of England warning that the coronavirus crisis could cause the country's biggest economic slump in 300 years.
"Despite their dizzying rally, we continue to be cautious on equities in the near term," Luca Paolini, chief strategist at asset manager Pictet said. "Markets seem to be overestimating the speed of economic recovery."
Bond markets saw one of the largest shifts in a while after the U.S. Treasury said it would borrow $2.999 trillion during the June quarter, five times more than the previous single-quarter record.
It will sell $96 billion next week alone and a surprising amount of that will be at longer tenors, which in turn pushed up long-term yields and steepened the curve.
Yields on 30-year Treasuries steadied after jumping 7 basis points to 1.40%, the largest daily increase since mid-March. The early rise in Italy's yields to over 2% reflected worries caused by a German court ruling this week targeting the European Central Bank's bond purchase programme.
The rise in U.S. yields gave a lift to the U.S. dollar versus most currencies and its index gained to 100.200. The euro dropped below $1.08, hurt too by a gloomy economic outlook from the European Commission.
The single currency sank to its lowest against the Japanese yen since late 2016 at 114.40, and even the dollar touched a seven-week trough at 105.98 yen before bouncing to 106.55 yen in Europe.
"There's a lot to like about the yen these days," said Deutsche Bank's global head of G10 FX Alan Ruskin.
He noted that with rates across the globe falling to all- time lows, the yen no longer had a large yield disadvantage.
"Across all of 3m, 2y, 5y and long-end tenors, the average spread between yen rates and the average of G10 yields are at lows not seen for at least the last three decades," he said.
The yen was also cheap by many measures, he argued, with fair value put at around 85 per dollar.
In commodity markets, conditions were changeable again. Gold had eased on expectations that supplies will grow as bullion refineries resume operations but turned higher to sit at $1,693 an ounce ahead of U.S. trading.
Oil prices were still wild, swinging from 1% down to 6% higher after a six-session streak of gains which has seen Brent almost double from a 21-year low hit in April.
Brent crude futures were up $1.80 at $31.59 a barrel, while U.S. crude had climbed from $23.85 to $26.40.
Additional reporting by Wayne Cole in Sydney; editing by Larry King, Kirsten Donovan