* FBI lifts cloud over Clinton campaign
* Mexican peso rallies
* Gold, bonds sag (Updates with U.S. market open; changes byline, dateline)
By Chuck Mikolajczak
NEW YORK, Nov 7 (Reuters) - Global equity markets surged on Monday, as did the U.S. dollar, putting them on track for their biggest gains in weeks after the FBI stood by its view that no criminal charges were warranted against Hillary Clinton.
The news lifted a cloud over the Democrat’s presidential campaign and gave it new momentum just two days before the U.S. election, and sent the benchmark S&P 500 index up more than 1 percent. The index was on pace to snap a nine-day losing skid, its longest in more than 35 years, and to post its best daily performance in over four months.
European stocks were up 1.4 percent and many of the safe-haven assets that had performed so strongly last week when polls showed Republican candidate Donald Trump closing the gap reversed course as gold and bonds fell.
Investors had been unnerved in recent days by signs of a tightening presidential race, preferring what is seen as a known quantity in Clinton, over the political wild card, Trump.
“It is certainly a relief rally for Hillary Clinton - investors worldwide were concerned about the uncertainty surrounding Trump,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“The other, more subtle reason, is if they are ending this email controversy you are not going to have a cloud hanging over her administration, creating roadblocks to getting things done.”
The Dow Jones industrial average rose 278.59 points, or 1.56 percent, to 18,166.87, the S&P 500 gained 36.44 points, or 1.75 percent, to 2,121.62 and the Nasdaq Composite added 102.25 points, or 2.03 percent, to 5,148.62.
MSCI’s all-country world index rose 1.2 percent and was on pace for its best day since June 30. The index had closed at a four-month low on Friday.
Europe’s index of leading 300 shares rose 1.4 percent , the strongest rally in seven weeks, with a 2.6 percent rise in financials leading the way.
One of the biggest winners was the Mexican peso, which has been a market proxy for sentiment over the U.S. election and has performed in inverse correlation with Trump’s perceived chances of winning the White House. The Republican candidate’s proposed policies are considered deeply negative for the country. It rose more than 2 percent to a 1-1/2 week high of 18.7172 per dollar.
The dollar jumped 0.79 percent against a basket of currencies after a 1.3 percent drop last week.
The shift in sentiment was reflected by the steep fall in anticipated market volatility. The VIX index, also known as Wall Street’s “fear gauge,” posted its biggest one-day fall in over four months and was poised to snap a record nine-day stretch of gains.
Gold, which also rose every day last week to a one-month high above $1,300 an ounce, fell 1.7 percent, its biggest drop since Oct. 4, to $1,281.53.
Bond prices retreated as risk appetite surged across the board. Benchmark 10-year note yields were down 10/32 in price to yield 1.8172 percent, up from Friday’s 1.783 percent.
Reporting by Chuck Mikolajczak; Editing by Bernadette Baum