World stocks surged on Monday and Wall Street looked set to join in, driven by robust economic news from China and relief that new global bank rules would not mean a rush to raise billions of dollars in extra capital.

The European Commission also sharply upgraded its forecasts for euro zone and broader European growth.

Taken together, the news assuaged some of the most trenchant concerns among investors at the moment — those of stuttering economic growth and over the health of the global financial sector.

World stocks as measured by both MSCI and Thomson Reuters were up 0.8%. The MSCI emerging market benchmark was up 1.5% at a 4-1/2 month high.

In Europe, the FTSEurofirst 300 gained 0.9% and Japan's Nikkei closed up the same.

"Risks of double dip (recession) straight away are clearly low. People have probably got over-worried in August that the end of the world is nigh," said Michael Dicks, head of research and investment strategy at Barclay's Wealth.

But he added: "That does not mean policymakers are not still going to have problems."

Asia emerging market growth has been a major fillip to the rest of the world this year, making up for a somewhat moribund U.S. economic performance. Numbers on Saturday showed China factories increased production in August and money growth easily topped analysts' expectations.

That was part of a mixed, but generally growth-positive message showing the economy remained buoyant despite Beijing's efforts to clamp down on bank lending and property speculation.

Global policymakers on Sunday also eased fears that lenders would have to raise capital over the next year or so, agreeing a long lead in to new requirements, known as Basel III, that require banks to hold top-quality capital totaling 7% of their risk-bearing assets.

That lifted banking shares across the board and looked set to start Wall Street off in positive territory.

The European Commission, meanwhile, almost doubled its forecast for this year's euro zone growth, adding to a chunk of data signs in the past month which have shown the European upturn may be stronger and more resilient than earlier expected.

In its twice-yearly interim economic forecasts for the 16 countries using the single currency, it said it expected the group to grow 1.7 percent this year, up from 0.9% forecast in May and a 4.1% contraction in 2009.

DOLLAR DOWN

Despite all the nerves around the U.S. recovery, economists are still forecasting it will grow faster than Europe, which is set to struggle with the impact of budget cuts required to head off worries over rising public debt across the bloc.

But the dollar has generally suffered as hopes for growth globally improve, and it also suffered as the EU forecasts improved views on the euro's prospects.

The single currency rose one percent against the dollar to $1.2802. It also rose 0.9 percent against the low-yielding yen to 107.63 yen.

"Better risk appetite is putting the dollar under pressure and the euro and currencies like the Australian dollar have been holding up very well," said Niels Christensen, currency strategist at Nordea in Copenhagen.

The dollar was half a percent lower against a basket of major currencies .DXY. The currency tends to get hit when investors buy riskier and therefore higher-yielding assets.

Euro zone government bond yields rose, reflecting lowered prices, for the same reason.