Stocks up on strong U.S. service sector report

NEW YORK (Reuters) - Global equities markets rose on Wednesday on data showing the pace of growth in the U.S. service sector surged in July to a decade high, as well as being boosted by solid corporate results in Europe, while the dollar teetered as investors gauged the likelihood of a September interest rate hike.

The U.S. Institute for Supply Management's services sector index rose to 60.3, its highest reading since August 2005, on sharp increases in business activity, employment and new orders. It beat expectations for a 56.2 reading. A reading above 50 indicates growth.

The data backed views the Federal Reserve will raise rates in September after weaker-than-expected U.S. private hiring figures for July released earlier in the day kindled doubts about a rate hike next month.

The market reflected "a modest bounce back after discernable pressure over the last trading sessions," said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.

The dollar mostly rose, supported by comments from Atlanta Federal Reserve President Dennis Lockhart, who is regarded as a centrist policymaker. Lockhart, in an interview on Tuesday, put September back on the table for the first U.S. rate rise in almost a decade.

Lockhart told The Wall Street Journal it would take "significant deterioration" in the U.S. economy for him to not support a rate hike next month.

Against the yen , the greenback rose to a two-month high, gaining 0.39 percent to 124.87. The U.S. dollar index <.dxy> slipped 0.02 percent at 97.916. The euro gained 0.17 percent to $1.0898, reversing earlier losses.

Wall Street mostly rose, but the Dow industrials fell even though gainers outpaced declining shares by 2 to 1. Shares of Dow component Walt Disney Co plunged 9.1 percent, the shares' largest single-day decline since 2008. Disney cut the profit forecast for its cable networks unit, spooking the entire industry.

The Dow Jones industrial average <.dji> closed down 10.22 points, or 0.06 percent, to 17,540.47. The S&P 500 <.spx> rose 6.52 points, or 0.31 percent, to 2,099.84, and the Nasdaq Composite <.ixic> added 34.40 points, or 0.67 percent, to 5,139.95.

Stocks gained more than 1.0 percent in Europe, with the pan-European FTSEurofirst 300 index <.fteu3> closing up 1.31 percent at 1,601.66. MSCI's all-country world stock index <.miwd00000pus> rose 0.24 percent.

Societe Generale shares jumped 7.9 percent after the French bank became the latest major European company to post forecast-beating earnings. Regional automakers, which fell in late July on concerns about a slowing China, rallied. The STOXX Europe index <.sxap> of 15 companies rose 2.5 percent.

In debt markets, U.S. Treasuries prices fell, while a sell-off in European bonds accelerated, after the strong ISM report.

The benchmark 10-year U.S. Treasury note fell 16/32 in price to yield 2.2699 percent.

German 10-year yields , the euro zone's benchmark, jumped 12 basis points to 0.75 percent.

Oil prices hit multi-month lows on a surge in U.S. gasoline stockpiles as the summer season, the country's biggest demand period for motor fuels, neared its end.

Futures of Brent, the global oil benchmark, hit a six-month bottom while U.S. crude touched a 4-1/2-month trough, ignoring a bigger-than-expected drawdown in U.S. crude stockpiles announced by the Energy Information Administration.

September Brent crude oil futures fell 40 cents to settle at $49.59 a barrel. U.S. crude for September delivery settled down 59 cents at $45.15 a barrel.

(Editing by Meredith Mazzilli and Leslie Adler; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)