Solid growth lifts shares, dollar

London - The dollar bounced higher against the yen and Japanese stocks led a rise in world shares on Monday as signs of economic momentum in the United States and Japan outweighed worries about a slowdown in China.

A central bank forecast that France's economy would grow slightly in the second quarter and a rise in French factory output helped underline the sense of recovery, as did better euro zone investor sentiment for June.

"The story is one of slow but steady growth, moving in the right direction but with headwinds still visible for the United States, euro area and China," said Sarah Hewin, senior economist at Standard Chartered Bank.

The improving outlook for major developed economies lifted MSCI's world equity index by 0.25%, its third straight day of gains, with US stock futures pointing to further rises when Wall St opens.

But investors are ultra-sensitive to the timing of any slowdown in the Federal Reserve's huge bond-buying programme and markets are expected to remain volatile as each new data report is closely scrutinised for hints of when it may begin.

The yen's fall, which improves the outlook for the country's exporters, and data showing the economy growing at a quicker pace than previously estimated, lifted the Nikkei index by 4.9% for its biggest one-day gain since March 2011.