GLOBAL MARKETS-Growth hopes pull European shares to 4-1/2 year highs

* European shares climb to 4-1/2 high

* Dollar index near 7-mth highs hit after retail data

* Spain eases through sales of long-term debt

* Euro hits new three-month low

LONDON, March 14 (Reuters) - European shares hit a 4-1/2 year high and the dollar hovered close to a seven-month peak on Thursday, as strong U.S. retail sales figures helped bolster hopes of a global economic recovery. February's statistics, published on Wednesday, showed consumer buying in the United States grew at the fastest pace since September, the latest data indicating the world's biggest economy is expanding more rapidly. Following another record high on Wall Street for the Dow Jones industrial index, the European FTSEurofirst 300 opened up 0.6 percent to hit its highest level since mid-2008. London's FTSE climbed 0.3 percent, Frankfurt's DAX rose 0.7 percent and Paris's CAC40 was up 0.6. Analysts say that the recent stellar run by stock market is down to the combination of improving growth in key economies like the United States and the ongoing commitment by major central banks to keep stimulus in place as long as needed. "The current rally is due to the cyclical expectations for the U.S. economy as it recovers," said Didier Duret, Chief Investment Officer at ABN Amro. "The better the U.S. performs the bigger the hope that we will see some spill over into Europe... We are overweight in equities and we love it," he added. The afterglow of the U.S. data also helped the dollar remain near the previous session's seven-month high as gains across the board helped push it up 0.1 to 82.996 against a basket of currencies. In contrast, recent dismal economic data out of the euro zone, coupled with political uncertainty in Italy and a likely bailout for Cyprus, kept the outlook for the euro bleak. In Greece, where the euro zone's debt crisis started, new figures showed unemployment rose to 26 percent at the end of last year as its economy continued to contract. The euro has shed 6 percent from its peak early last month and another 0.25 percent drop saw it hit its latest three-month low at $1.29185. Bank of Tokyo Mitsubishi currency strategist Derek Halpenny said the currency was likely to remain under pressure, especially if Germany sticks to its demands for spending cuts in debt-strained countries at a two-day meeting of euro zone finance ministers in Brussels. "If there had been some indication of greater flexibility for France and Spain, at the margins it could have been positive for the euro because there would have been a better growth story, but it doesn't look like that is going to happen," he said.

SPAIN AUCTION Italian and Spanish bonds were also both down on the day despite a positive start. Investors bought 803 million euros of long-dated Spanish debt at a special auction Madrid had rushed together, but focus remained on the political stalemate in Italy following its inconclusive elections last month. Markets will find out next Tuesday whether, as looks increasingly likely, new elections will have to be held following the deadlock. "If there are new elections they won't be until October and that means political uncertainty will remain for most of the year... It could be another interesting summer," said Daiwa securities economist, Tobias Blattner.

COMMODITIES CAPPED U.S. stock futures pointed to a tenth straight day of gains for Wall Street after Wednesday saw the Dow Jones industrial average hit its latest all-time high. Another currency grabbing attention was the Australian dollar as it jumped to a five-week high of $1.0383 against the dollar after employment data exceeded forecasts to post the biggest increase in over a decade. The strong U.S. data also buoyed commodity markets, with prices of growth-attuned oil, copper and platinum all edging higher. A decoupling appears to have taken place between hard-surging stocks and traditionally growth-linked commodities over the past couple of months. Whereas the U.S. S&P 500 is up roughly 3.5 percent since the start of February and world shares are almost 2 percent higher, oil and copper prices are down over 5 percent, and platinum and iron ore are down 4.5 and 3.5 percent. Oil had ticked up 35 cents by 1130 GMT but stayed below $109 a barrel, capped by the firmer dollar and broader questions over demand in key consuming emerging economies such as China. Two of the three most closely watched oil forecasters - the International Energy Agency and U.S. government's Energy Information Administration - lowered global oil demand growth forecasts this week. China's central bank also sent ripples through the market after its comments on stabilising inflation expectations reinforced concern it may drop its pro-growth policy before economic expansion gathers full momentum. "A lot of people have been pricing in a strong pick-up in oil demand from China this year and some of those expectations may be pared back," said Natalie Rampono, commodity strategist at ANZ in Melbourne.