GLOBAL MARKETS-U.S. data spurs equity rally, lifting Dow to 10th straight gain

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* Decline in U.S. jobless claims lifts equity rally

* S&P 500 misses record high; European shares at 4-1/2-year high

* Dollar index hits seven-month high, then retreats

* U.S. Treasuries pare losses

NEW YORK, March 14 (Reuters) - The Dow rose for a 10th straight day and the S&P 500 advanced to just shy of an all-time closing high on Thursday in a global equity rally spurred by data that pointed to a stronger U.S. labor market and a steadily improving American economy. The U.S. dollar rose to a seven-month high against a basket of currencies and a three-month peak versus the euro, helped by data showing the U.S. current account deficit, a broad measure of international trade, narrowed in the fourth quarter. The dollar later retreated. Wall Street followed gains that pushed European shares to a 4-1/2-year high after the Labor Department said initial claims for state unemployment benefits unexpectedly fell in the latest week. A better measure of labor market trends - the four-week moving average for new claims - declined to the lowest level in five years. "Every week that claims stay down, it confirms it's not an anomaly, and this is pretty important," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. The downward trend in jobless claims is "one of the reasons the market has been strong year to date," he said. U.S. equities have rallied since the start of the year on an improving economy and the Federal Reserve's easy monetary policy, helping push blue chip stocks to the longest string of gains since November 1996. The S&P 500 rose for the ninth time in 10 days and closed less than 2 points from an all-time closing high of 1,565.15 set in October 2007. The Dow Jones industrial average closed up 83.86 points, or 0.58 percent, at 14,539.14. The Standard & Poor's 500 Index added 8.71 points, or 0.56 percent, at 1,563.23. The Nasdaq Composite Index gained 13.81 points, or 0.43 percent, at 3,258.93. MSCI's measure of global equities gained 0.7 percent 362.06. The European FTSEurofirst 300 of leading regional shares closed at its highest level since August 2008, up more than 1 percent after strong U.S. retail sales on Wednesday helped bolster views of the U.S. economy. "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 in Amsterdam. "The better the U.S. performs, the bigger the hope that we will see some spillover into Europe ... We are overweight in equities and we love it," he added. The dollar, lifted by the U.S. current account and other data, climbed to a seven-month high of 83.166 against a basket of major currencies. Economists argue that less red ink in the U.S. trade balance bolsters foreign investors' faith in the U.S. economy and supports the dollar. The euro rebounded to trade higher at $1.3001. The single currency has shed 6 percent from a peak early last month. Oil rose above $109 a barrel, rebounding after four days of losses, although a subdued outlook for demand growth and easing supply concerns limited the gains. The U.S. jobs data also gave oil a lift. Brent crude for April gained 90 cents to settle at $109.42 a barrel. U.S. oil settled up 51 cents at $93.03. U.S. Treasuries extended price losses on the jobless claims report. The benchmark 10-year U.S. Treasury note was down 3/32 in price to yield 2.0331 percent.