(Corrects ticker symbol of UniCredit in paragraph 18)
* U.S. stocks advance as data feeds momentum
* ECB cash injection lifts sentiment in Europe, boosts banks
* U.S. data, while tepid, offers fresh encouragement
By Herbert Lash
NEW YORK, March 1 (Reuters) - Global stocks rose on Thursday as investors zeroed in on positive economic data in hopes the equity rally would surge forward, while crude oil gained on signs of stronger fuel demand and worries over supply disruptions related to Iran.
U.S. stocks recouped declines from Wednesday after the latest data on jobless claims bolstered views of an improving labor market and solid monthly sales from retailers bolstered investor sentiment.
But gains were muted on fears that other data signaling slower growth will keep this year's rally, which has pushed major stock indexes to multi-year highs, from climbing much further.
U.S. manufacturing unexpectedly cooled in February and consumer spending was flat in January for a third straight month after accounting for inflation, casting doubts on the strength of the recovery.
In oil markets, Brent crude rose above $124 a barrel as the data indicating strength in the U.S. economy and Chinese data showing stronger-than-expected factory growth in February drove expectations of strong demand for oil.
The ongoing concerns about disruptions of Iran oil supplies, already being reduced in the wake of Western sanctions against Tehran for its disputed nuclear program, added support.
Brent crude rose $2.19 to $124.87 a barrel. U.S. oil was up 75 cents to $107.82.
On Wall Street investors said that the 13,000 level on the Dow, which was breached on Monday for the first time since May 2008, represented a major psychological barrier for stocks to move ahead.
"There is enough around that could drive this market either way," Gordon Charlop, managing director at Rosenblatt Securities in New York
"A lot of the guys on the floor are sensing barring some significant event - whether that be geopolitical or relating to the European debt crisis - we could potentially at some point just explode through."
The Dow Jones industrial average was up 49.15 points, or 0.38 percent, at 13,001.22. The Standard & Poor's 500 Index was up 8.20 points, or 0.60 percent, at 1,373.88. The Nasdaq Composite Index was up 23.99 points, or 0.81 percent, at 2,990.88.
Also supporting gains on Thursday, major U.S. automakers posted stronger sales in February.
Shares of Ford Motor Co rose 3.1 percent, and shares of General Motors rose 2.4 percent.
European stocks rose 1 percent, led by bank shares, after the European Central Bank's second cash injection helped to further allay fears of default.
The FTSEurofirst 300 index of top European shares ended 1.1 percent higher at 1,086.72 points, hitting levels not seen since Feb. 22.
"The funding risk in the banking system has reduced substantially," Dennis Jose, strategist at Barclays Capital, said. "The risk the sovereign having to eventually bail out the banks has also reduced" with the ECB's liquidity measure.
Euro zone banks rose 2.6 percent after borrowing costs for both France and Spain fell at auctions on Thursday and yields on Italian notes dropped on the secondary market.
Italian banks, which own the lion's share of the country's debt, led gainers with Banco Popolare rising 10.5 percent and UniCredit up 5.8 percent.
But gains were limited as key benchmark indexes in Europe and on Wall Street failed to convincingly break above major resistance levels as a brisk 2-1/2-month rally loses steam.
The euro was fell slightly in volatile trading after falling to a one-week low on initial concerns over U.S. economic data.
Remarks by Federal Reserve Chairman Ben Bernanke had little impact on the market. Bernanke said he was worried that the rapid decline in U.S. unemployment may not be sustained.
Bernanke's prepared remarks on Thursday were mostly a repeat of the prior day's testimony, when he stopped short of signaling a further easing of monetary policy, which some in the market had expected.
The euro was down slightly 0.1 percent at $1.3306.
The euro had been weak before New York opened after the ECB's huge cash injection reminded investors of the region's debt overhang and the fragile euro zone economy.
The ECB's move had a big effect on the euro zone debt market with Italian government bond yields now closer to safe haven German government debt than they have been since September last year.
The 10-year benchmark Italian government bond yield was around 5.0 percent, having dipped under that level briefly, while the two-year bond fell below 2 percent for the first time since November 2010.
U.S. Treasuries prices briefly pared early losses after the Institute for Supply Management said its index of U.S. factory activity fell to 52.4 from 54.1 the month before. The reading was shy of expectations of 54.5, according to a Reuters poll of economists. A reading above the 50 mark indicates expansion.
Benchmark 10-year notes were off 20/32 in price to yield 2.04 percent. (Reporting By Herbert Lash; Additional reporting by Ellen Freilich, Chuck Mikolajczak and Nick Olivari; Editing by Leslie Adler)