* September U.S. rates "liftoff" back on table
* Oil rises for second day after U.S. inventories fall
* Dollar index at highest since April (Adds U.S. market open, byline, dateline, previous LONDON)
By Herbert Lash
NEW YORK, Aug 5 (Reuters) - The dollar rose on Wednesday after data showed the pace of growth in the U.S. service sector surged in July to its best level in a decade, helping lift stocks on Wall Street while solid corporate earnings pushed equities higher in Europe.
Led by sharp increases in business activity, employment and new orders, the Institute for Supply Management's services sector index rose to 60.3, its highest reading since August 2005, beating expectations of 56.2. ID:nN9N10A00G
The dollar rebounded on the ISM data, which supported views the Federal Reserve would raise interest rates in September. Weaker-than-expected July private hiring figures released earlier in the day had briefly raised doubts about a rate hike next month. ID:nZON1YIM00
"For most people watching the market, whether it's September or December isn't that critical, most people are assuming it will happen this year. They've already factored that in to the way they look at the market," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
The dollar also gained after Atlanta Fed President Dennis Lockhart, regarded as one of the Federal Open Market Committee's centrist policymakers, put September back on the table for the first U.S. rate hike in almost a decade.
The dollar rose to a two-month high against the yen, and strengthened against other major currencies. The dollar index .DXY erased earlier losses and was up 0.14 percent at 98.071.
Against the euro EUR= , the dollar was up 0.13 percent at $1.0866. The greenback was up 0.39 percent at 124.87 yen JPY= .
The Dow Jones industrial average .DJI rose 96.08 points, or 0.55 percent, to 17,646.77. The S&P 500 .SPX gained 17.79 points, or 0.85 percent, to 2,111.11 and the Nasdaq Composite .IXIC added 69.58 points, or 1.36 percent, to 5,175.13.
Stocks gained more than 1 percent in Europe, with the pan-European FTSEurofirst 300 index .FTEU3 up 1.24 percent at 1,600.57. MSCI's all-country world stock index .MIWD00000PUS rose 0.44 percent.
Societe Generale SOGN.PA shares jumped 8.9 percent after the French bank became the latest major European company to post forecast-beating earnings, while regional carmakers .SXAP , which fell in late July on concerns about a slowdown in the Chinese market, also rallied.
U.S. Treasuries prices fell after the strong ISM report.
The benchmark 10-year U.S. Treasury note fell 17/32 in price to yield 2.2736 percent
Oil prices edged higher for a second day, recovering from a drop below $50 a barrel, after weekly data showed a fall in U.S. crude inventories, though a stronger dollar tempered gains.
September Brent crude futures LCOc1 rose 35 cents to $50.34 a barrel. U.S. crude for September delivery CLc1 gained 13 cents to trade at $45.87 a barrel.
(Editing by Larry King and Meredith Mazzilli; 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)