World stocks rally, dollar up to two-month high against yen

Stock markets rallied on Monday and the U.S. dollar hit a two-month high against the yen, as robust economic data from the United States and Germany left investors increasingly confident about the strength of the world economy.

Focus also turned to Federal Reserve chief Janet Yellen's semi-annual testimony on monetary policy and a meeting of Canada's central bank on Wednesday for the latest signals on policy from major central banks.

For now, unease about an end to an era of ultra-cheap money has given way to optimism about global growth, with Friday's stronger-than-expected U.S. non-farm payrolls report bolstering risk appetite. Data on Monday showed exports from Germany, Europe's biggest economy, rose more than expected in May.

The pan-European STOXX 600 rallied 0.4 percent, with banks and utilities the strongest sectors. Blue-chip stock markets in London .FTSE, Paris .FCHI and Frankfurt .GDAXI climbed 0.2 to 0.5 percent. [.EU]

They followed gains in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent and Japan's Nikkei .N225 gained 0.8 percent to a one-week high, helped by weakness in the Japanese currency.

MSCI's emerging markets benchmark .MSCIEF posted its best day in two weeks. U.S. stock futures ESc1 1YMc1 were largely flat after strong gains on Wall Street on Friday.

The dollar rose almost 0.4 percent to 114.29 yen JPY=D4, a two-month peak, while the dollar index - which measures the dollar's value against a basket of other major currencies - was a touch firmer at 96.142 .DXY. The euro was softer at $1.1388 EUR=.

Oil prices declined, extending losses at the end of last week on the back of high drilling activity in the United States and ample supplies from OPEC and non-OPEC nations.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $46.27 per barrel, down 50 cents, or around 1 percent, from their last close.