May 18, 2020 / 3:41 PM / 10 days ago

GLOBAL MARKETS-Global shares, oil rally as lockdowns ease, vaccine hopes

(Adds U.S. market open; changes byline, dateline; previous LONDON)

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

* Stocks rally on potential COVID-19 vaccine

* Oil surges as easing of lockdowns spurs recovery hopes

* Gold hits seven-year peak but eases on stock rally

* For Reuters Live Markets blog on stock markets, please click on:

By Herbert Lash

NEW YORK, May 18 (Reuters) - A gauge of global equity markets surged more than 2% on Monday and oil rallied to highs last seen in mid-April as data from a potential COVID-19 vaccine trial lifted both sentiment and hopes of a faster recovery from the coronavirus-driven economic slump.

Warm weather enticed much of the world to emerge from coronavirus lockdowns as centers of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

Investors have cheered any positive development by drugmakers' vaccine trials amid fears of a second wave of infections as restrictions are eased.

Drugmaker Moderna Inc said its experimental COVID-19 vaccine showed promising results in a small early stage trial, leading its stock to jump 23.2%.

A workable vaccine that can be mass-produced by year-end or early 2021 would be a "game-changer" for industries whose challenges may not be resolved by the economy's reopening, said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

Global economic output will take two or three years to recover to pre-pandemic levels, IHS Markit said in a note, projecting worldwide GDP to fall 5.5% in 2020, or three times the 2009 contraction after the global financial crisis.

Under the best of circumstances, it will be a long road for the U.S. economy to recover, with additional job losses likely through June, Federal Reserve Chairman Jerome Powell said in an interview on Sunday.

MSCI's gauge of stocks across the globe gained 2.79%, on track to its biggest rise in a month, while the pan-European STOXX 600 index rose 3.98%.

On Wall Street, the Dow Jones Industrial Average rose 821.57 points, or 3.47%, to 24,506.99. The S&P 500 gained 88.28 points, or 3.08%, to 2,951.98 and the Nasdaq Composite added 215.66 points, or 2.39%, to 9,230.22.

"The resilience of stock markets relative to the awful economic data that we've been seeing over the past fortnight speaks to an optimism that... as economies come out of lockdown we can expect to see improvements as we head into the second half of the year," said Michael Hewson, chief market analyst at CMC Markets.

Japan's preliminary GDP data showed that the world's third- biggest economy contracted an annualized 3.4% in the first quarter, slipping into a recession for the first time in more than five years.

Hopes of a worldwide economic recovery lifted oil prices, supported by output cuts.

"Optimism on the demand side of the oil equation has helped prices climb further, with gasoline demand coming back as governments ease confinement measures," said Rystad Energy’s senior oil markets analyst Paola Rodriguez Masiu.

U.S. crude recently rose 12.23% to $33.03 per barrel and Brent was at $35.41, up 8.95% on the day.

The jump in oil prices lifted commodity currencies such as the Norwegian crown and the Canadian dollar against the U.S. dollar as optimism about a reopening of economies stifled by the pandemic boosted risk appetite.

The dollar index fell 0.529%, with the euro up 0.56% to $1.0876. The Japanese yen weakened 0.33% versus the greenback at 107.41 per dollar.

The Norwegian crown was lifted by the rising oil prices, up around 0.8% versus the euro.

Germany's 10-year bond yield declined to -0.495% .

Benchmark 10-year U.S. Treasury notes fell 21/32 in price to push their yield up to 0.7078%.

Gold pared gains from a seven-year peak earlier in the session to trade slightly lower as hopes of a potential COVID-19 vaccine trial offset weak economic data and buoyed U.S. equities.

Spot gold dropped 0.5% to $1,732.55 an ounce.

Reporting by Herbert Lash; Editing by Dan Grebler

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