* Dollar index falls the most in a month

* World shares see first rise in 5 days as Wall Street rallies

* Brent, WTI fall despite dollar weakness (Updates prices, adds comment)

By Rodrigo Campos

NEW YORK, March 12 (Reuters) – Stocks in major markets rose on Thursday as the dollar softened the most in a month against major currencies after surprisingly weak U.S. data.

The U.S. currency retraced gains after earlier hitting a 12-year high versus the euro, pressured by a third-straight decline in monthly U.S. retail sales.

Crude fell on concerns over a supply build at the delivery point for U.S. oil.

Stocks rose on Wall Street, led by bank shares after the Federal Reserve approved most of their capital plans, many of which include share repurchases and dividend hikes.

The S&P 500, however, was on track for its third consecutive weekly decline, hit by the prospect of higher U.S. interest rates and the effect of the strong dollar on corporate earnings. The much stronger-than-expected payrolls report last Friday cemented views of a hike coming sooner than previously expected.

“I’ve been a believer in a June rate hike for a while, but the odds really went up on Friday, and the market action we’ve seen since then is in line with the volatility we’ve historically seen around rate hikes,” said James Liu, global market strategist for JPMorgan Funds in Chicago.

The Dow Jones industrial average rose 194.07 points, or 1.1 percent, to 17,829.46, the S&P 500 gained 19.76 points, or 0.97 percent, to 2,060, and the Nasdaq Composite added 30.54 points, or 0.63 percent, to 4,880.48.

MSCI’s main world stocks index rose 0.8 percent, posting its first gain in five sessions. The FTSEurofirst 300 index of top European shares ended flat after touching a 7-1/2-year high on the European Central Bank’s 1 trillion euro bond purchase program that began this week.

The euro bounced back from 12-year lows hit overnight under pressure from the ECB’s program. The bloc’s single currency was up 0.6 percent at $ 1.0604 after earlier hitting $ 1.0494.

The dollar has strengthened on the diverging policies of the Fed against other major central banks. In addition to the ECB, other central banks becoming more accommodative include Japan and South Korea, which surprised with an interest rate cut hot on the heels of one from Thailand. A cut in Serbia’s repo rate took the number of central banks around the world that have cut rates this year to 24.

The Fed’s policy-setting committee meets next week.

“I think we’re finally seeing some early signs of fatigue in the dollar’s rally,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C.

“Caution is on the rise ahead of next week’s Fed meeting. On the one hand, steady job growth has many expecting the Fed to lay the groundwork for an eventual rate hike. But this rapid rise in the dollar could warrant a warning from the Fed as a potential threat to growth,” he said.

The dollar index, which measures the greenback against a basket of major currencies, fell 0.4 percent to 99.4.


Brent and U.S. crude surrendered early gains in volatile trading before the expiry of their front-month contracts and on fears of a supply build at the delivery point for U.S. oil.

“The Cushing estimate shows more of the same old for U.S. crude – intense amounts of supply and shaky demand,” said John Kilduff, partner at New York energy hedge fund Again Capital.

The reopening of the Houston Shipping Channel for oil imports and the potential nearing of a deal to end a U.S. refinery workers strike contributed to market bearishness, traders said.

Brent fell 0.8 percent to $ 57.06 a barrel, while U.S crude futures dropped 1.1 percent to $ 47.64 a barrel.

Copper prices rose 1.9 percent as the greenback weakened, even as demand for spot copper in China strengthened only marginally this week after most factories returned from near month-long Lunar New Year holidays.

Spot gold, however, posted its ninth consecutive daily decline.

U.S. debt prices pared gains after a soft bond auction.

Yields on the benchmark 10-year note edged up to 2.116, their price down 2/32. The 30-year U.S. Treasury bond was last down 10/32 and yielding 2.6979 percent, compared with 2.683 percent late Wednesday.

(Additional reporting by Daniel Bases, Barani Krishnan and Ryan Vlastelica; Editing by Dan Grebler and Leslie Adler)