World stocks and commodity prices rose on Thursday after China's central bank reaffirmed loose monetary policy and European corporate earnings cheered investors, while the dollar and government bond prices fell.

The People's Bank of China pledged to maintain loose monetary policy and use market tools, not quota-style controls, to ensure sustainable credit growth that will support economic recovery.

Worries that Beijing might be prepared to tighten lending had spooked investors and weighed on commodity prices and equities, as the country's loose monetary policy had helped revive global growth. Mostly positive corporate earnings also helped buoy market sentiment. British telecoms group BT posted a better-than-expected 3 percent fall in first-quarter adjusted core earnings and France Telecom also reported higher-than-expected first-half operating income.

The earnings season gives the market a nice tailwind. Investors should not become careless, but we are far from the end of the world, said Roger Peeters, strategist at Close Brothers Seydler in Frankfurt.

Most figures are affected by the economic crisis but not worse than recently expected. Global equities were in demand, with the MSCI world equity index advancing 0.3 percent after two days of loss.

In Europe, the FTSEurofirst 300 index rose 0.6 percent, while Japan Nikkei average put on 0.5 percent, hitting its highest close in nine months, and Chinese stocks gained 1.7 percent after a 5-percent sell-off on Wednesday.

BT shares soared nearly 12 percent and those for France Telecom gained 3.2 percent.

According to Thomson Reuters data, the second-quarter blended earnings growth rate for DJ STOXX 600 improved to -40.4 percent on Wednesday close from -43.9 percent a week ago. So far 95 companies have reported, of which 50 beat estimates, two matched and 43 missed, the data showed.

On the economic front, German unemployment fell by 6,000 on the month in seasonally adjusted terms in July.

COMMODITIES UP, DOLLAR DOWN

Metal prices rose, with copper regaining some ground following a sell-off in the previous session.

Crude prices traded higher at above $63 a barrel after sliding almost 6 percent the day before on data showing a jump in U.S. crude stocks.

The dollar fell 0.1 percent against the yen, while the euro

rose 0.2 percent at $1.4054.

I personally feel that the market will see further corrective moves before more clues emerge on how the economy will fare after this summer, with the dollar broadly rising and commodities fall, said Kosuke Hanao, head of treasury product sales for HSBC in Tokyo.

Yields on the benchmark 10-year U.S. Treasury rose 3 basis points at 3.696 percent as investors stayed cautious ahead of a seven-year debt sale, after a second poor auction this week heightened supply concerns.

The 10-year euro zone benchmark bund yield was up 2 basis points at 3.453 percent.

(Additional reporting by Christoph Steitz in Frankfurt, and Charlotte Cooper and Satomi Noguchi in Tokyo; Editing by Victoria Main)

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