HK, China shares end July on strong note

* China stocks gain 15 pct in July, biggest in two years

* HK shares rally for 5th month, up 3 pct on week

* Datang shares jump on strong profit outlook (Updates to close)

By Parvathy Ullatil and Samuel Shen

HONG KONG, July 31 (Reuters) - Hong Kong and China stocks rose on Friday, regaining their composure from Wednesday's steep sell-off, after the central bank reassured investors it would stick to a loose monetary policy and would not curb lending.

Both markets recorded another month of hefty gains in July, the seventh successive monthly gain for Shanghai and the fifth winning month for Hong Kong, fuelled by positive earnings momentum and analyst upgrades.

In the absence of a major disappointment in U.S. economic data due next week, or in corporate earnings that will continue to trickle in through August, analysts expect the stock markets to continue their upward trajectory.

"A lot of people, including some long funds out there, are still underweight on the market because they didn't buy the recovery story. But there is only so long you can wait, you have put that money to work," said Andrew Sullivan, sales trader with MainFirst Securities.

China's 4 trillion yuan ($585.5 billion) stimulus package, unprecedented lending growth and stabilising economy have helped to propel a more than doubling of the Shanghai index from last October's two-year low and fuelled a 43 percent surge in Hong Kong shares.

POWER STOCKS ELECTRIFY

Power companies, which have lagged the market rally this year, jumped on Friday, after Datang International Power Generation (601991.SS) forecast a surge in first-half profit. [ID:nHKG92038]

Datang jumped its 10 percent daily limit to 10.47 yuan in Shanghai, while its Hong Kong-listed shares (0991.HK) jumped 5.4 percent to HK$5.09

China Resources Power (0836.HK) climbed 5.5 percent in Hong Kong. The country's fourth largest power producer plans to take a 25 percent stake in a 25 billion yuan ($3.66 billion) nuclear project in Hunan, China, chief financial officer Wang Xiaobin told Reuters on Thursday. [ID:nHKG283866]

The benchmark Hang Seng Index .HSI finished up 339.25 points at 20,573.33 after scaling an 11-month high of 20,712.66 earlier amid strong corporate earnings forecasts and analyst upgrades.

HSBC (0005.HK) lead the charge with a 4.6 percent jump even as some analysts predicted a loss for the global banker when it reports its first-half earnings next week on the back of write-offs at its U.S. unit.

The gauge gained 11.9 percent in July and 3 percent in its third consecutive weekly rally. Continued...

FOREX-US dollar hits 2009 low as risk appetite increases

* Euro having best day vs dollar in more than a month

* U.S. economy contracts 1.0 percent in Q2

* GDP report shows renewed decline in consumer spending

* Business activity in the U.S. Midwest improves (Updates prices, adds quote, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, July 31 (Reuters) - The dollar fell to its lowest for the year on Friday, weighed down by higher oil prices, steady stock prices and data showing an unexpectedly small contraction in the U.S. economy, boosting risk appetite.

Month-end flows as investors rebalanced portfolios also weighed on the dollar, traders said, curbing demand for the greenback as a safe haven. The dollar extended declines after key technical levels were breached.

Government data on Friday showed U.S. gross domestic product shrank at a slower-than-expected pace in the second quarter, although the report also showed a drop in consumer spending. For related news click [ID:nN31416560].

"I don't think the GDP report is all that bad. Looking at the data, the liquidation in the first half of the year is quite positive for second-half growth," said Adam Boyton, senior currency strategist at Deutsche Bank in New York.

That has contributed to the overall recovery theme and boosted risk appetite, he added.

Further adding to the positive risk tone was the surge in commodity prices, with oil prices rising nearly 3 percent CLc1.

In mid-afternoon trading in New York, the ICE Futures U.S. dollar index, which tracks its movements against a basket of six other major currencies, fell 1.3 percent to 78.291 .DXY, after falling as low as 78.220, a fresh 2009 low.

At current prices, the dollar index was on track to post a 2.3 percent fall for July.

The euro EUR= rose 1.3 percent on the day to $1.4252, its biggest one-day gain in more than a month. The euro zone's single currency was up 1.6 percent for July.

The dollar fell 0.8 percent against the yen to 94.71 yen JPY=. The euro rose 0.5 percent versus the Japanese currency to 135.03 EURJPY=R.

Data showing business activity in the U.S. Midwest in July increased more than expected also boosted demand for riskier assets, analysts said. Continued...

FOREX-Dollar slides as oil, stocks rally cuts haven demand

* U.S. continuing jobless claims fell, lifting dollar/yen

* Positive Treasury auction results lift risk demand

* Investors await U.S. GDP figures on Friday (Adds quote, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, July 30 (Reuters) - The U.S. dollar weakened against major currencies on Thursday as a rebound in global stocks and commodities on optimism about an economic recovery worldwide dimmed the greenback's safe-haven allure.

U.S. stock indexes .SPX jumped after a string of stronger-than-expected corporate results, while European shares.FTEU3 closed at their highest in nearly nine months.

Commodities also strengthened, with oil CLc1 rising above $66 a barrel. That pressured the yen as well, which tends to fall along with the dollar when there is demand for riskier assets.

A $28-billion seven-year U.S. Treasury auction on Thursday attracted strong demand, easing concerns about financing the massive U.S. budget deficit. The bid-to-cover ratio, which measures demand, was 2.63 after 1.92 on Wednesday.

"Today risk is on and it's helped a lot by the rally in equities," said Shaun Osborne, chief currency strategist at TD Securities in Toronto. "The auction results also helped risk appetite to a certain extent."

Indirect bidders, a gauge of foreign interest, accounted for 62 percent, following just 37 percent on Wednesday and 33 percent on Tuesday. For more, see [ID:nN30363691]

In late afternoon trading, the ICE Futures U.S. dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.4 percent to 79.328 .DXY. It hit a 2009 low of 78.315 on Tuesday, before staging a strong rebound on Wednesday.

The dollar's losses were limited, however. Many investors stayed on the sidelines ahead of the first reading of second-quarter U.S. gross domestic product on Friday.

The economy is forecast to have contracted by 1.5 percent after a fall of 5.5 percent in the first three months of the year, according economists polled by Reuters.

The report "should be a pretty important piece of data for the recovery/recession debate that seems to be ongoing," said Adam Fazio, currency strategist at CIBC World Markets in New York.

He said CIBC is looking for "a much worse reading," and should the GDP data disappoint, the dollar could see "further strength" as investors look for safe-haven investments.

EURO VALUATION Continued...