GLOBAL MARKETS-Dow hits record on China bets, U.S. data; commodities rise

* Central banks expected to extend easy policies

* Brent crude ends a five-day losing streak

* Copper gains as China pledges to maintain growth

NEW YORK, March 5 (Reuters) - The Dow Jones Industrial Average hit a record high on Tuesday as major world stock markets rallied after China pledged more government spending to boost economic growth and after data showed the U.S. service sector expanding at its fastest pace in a year in February.

Crude oil and copper prices also advanced on China's pledge deliver economic growth of 7.5 percent this year in the world's largest economy.

On Wall Street, the Dow Jones Industrial Average surpassed the highs seen in 2007, before the financial crisis, breaking the previous intraday record of 14,198.10 set on Oct. 11, 2007.

"Stocks are close to fair value, but very cheap relative to the bond market and to cash which is very expensive," said David Kelly, managing director and chief market strategist at JPMorgan Asset Management in New York.

"Central banks have been keeping rates low and that justified higher stock prices. But we weren't seeing that because of these risks. As these risks have diminished, money is going into stocks because it has nowhere else to go. That led to the new high on the Dow Jones Industrial Average today," he said.

After the peak in 2007, stock markets crashed as the U.S. and Europe entered a deep recession. The rebound in U.S. equity markets has been much stronger than in Europe as the United States did not embrace the sharp government austerity measures that have hindered economic growth in Europe, while added liquidity from the Federal Reserve and historically low interest rates have fueled investor appetites.

"Things that could really have gone wrong like a blowup in Europe or a fiscal cliff in the United States or a crash landing in China created an extreme disparity between stocks and bonds and cash," Kelly added.

Even though the Dow hit a record high, its euro zone peer, the blue chip Euro STOXX 50 still needs to gain more than 70 percent to reach its June 2007 top.

An MSCI gauge of global equities rose 1.1 percent on Tuesday and European shares bolted 1.8 percent higher.

In morning trade on Tuesday, the Dow Jones industrial average rose 147.4 points or 1.04 percent, to 14,275.22, the S&P 500 gained 15.86 points or 1.04 percent, to 1,541.06 and the Nasdaq Composite added 38.78 points or 1.22 percent, to 3,220.81.

In the oil market, Brent crude bucked a five-day losing streak to rise to near $111 a barrel, as the North Sea Brent pipeline remained closed for a third day and investors bet on strong Chinese oil demand.

Brent crude oil rose 0.6 percent towards $111 per barrel while U.S. crude added 23 cents to $90.35.

Copper prices jumped 0.7 percent after top consumer China's pledge to maintain economic growth at 7.5 percent. Three-month copper on the London Metal Exchange rose to $7,776 a ton.

Demand for riskier assets has also been supported by unprecedented levels of liquidity injections by the world's major central banks, and investors are seizing on any signs this will continue.

Comments from the U.S. Federal Reserve's vice chair Janet Yellen on Monday backing the current aggressive stimulus effort, and a decision by Australia's Reserve Bank to keep interest rates at record lows were the latest signs policies will remain in place.

The Bank of Japan, the Bank of England and the European Central Bank are all expected to either keep current loose policies in place or add extra stimulus after their policy meetings this week.

The euro edged lower against the U.S. dollar on Tuesday while the greenback pared losses against the yen after data showed the vast U.S. services sector accelerated at its fastest pace in a year in February.

"The market is seeing positive U.S. data as positive for the dollar," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Economic data is providing underlying support."

Prices for U.S. Treasuries fell as growth hopes for China helped push stocks to record highs, with yields for U.S. government debt range-bound as investors looked to central bank meetings and the U.S. payrolls report.

Yields were pressured slightly higher by the U.S. data.

Benchmark 10-year Treasury notes fell 5/32 in price to yield 1.8961 percent, up from 1.8789 percent on Monday.