(Recasts with U.S. markets, changes dateline; previous
LONDON)
* U.S., European shares rise amid supportive economic data
* Oil prices bounce back slightly above $127 a barrel
* Dollar, bonds gain on tame U.S. inflation reading
By Herbert Lash
NEW YORK, May 30 (Reuters) - A mild U.S. inflation reading
on Friday calmed fears that consumer prices may be spiraling
out of control, underpinning a modest rise in U.S. and European
stocks and helping lift recently depressed government debt.
A slight bounce back in oil prices to above $127 a barrel
also helped alleviate growing inflation fears since costly oil
is seen curbing economic growth. The impact of high oil prices
showed up in the euro zone as inflation surged and Jean-Claude
Trichet, president of the European Central Bank warned of still
more to come.
The dollar fell against the euro as some investors sold the
U.S. currency after a string of recent gains had pushed it to
its first back-to-back monthly gains since January 2007.
Short-term euro zone government bond yields eased after
rising inflation put yields on track for their steepest monthly
gain in years.
Unexpectedly weak German retail sales helped moderate the
inflation concerns, though Trichet said in a published
interview that the ECB was worried the sharp rise in global oil
and commodity prices could lead to spiraling wages and consumer
prices.
U.S. stocks edged higher on stronger-than-expected earnings
from computer maker Dell Inc <DELL.O> and a 0.1 percent advance
in the core personal consumption expenditures price index, the
Federal Reserve's preferred measure of inflation.
Dell's unexpectedly high quarterly earnings were driven by
cost cuts and strong consumer and foreign demand. Shares jumped
6.8 percent to $23.29, and were among the top boosts to the
Nasdaq and the benchmark Standard & Poor's 500 Index.
But crude oil <CLc1>, trading around $127 a barrel remained
both a damper on economic growth and investor enthusiasm.
"Any increase in oil prices constitute headwinds," said
Subodh Kumar, chief investment strategist at Subodh Kumar &
Associates in Toronto.
However, Kumar said "the stronger technology companies have
been reporting good earnings and we still believe the strong
technology companies are likely market leaders in coming
days."
Before 1 p.m., the Dow Jones industrial average <> rose
16.04 points, or 0.13 percent, at 12,662.26. The Standard &
Poor's 500 Index <.SPX> was up 3.75 points, or 0.27 percent, at
1,402.01. The Nasdaq Composite Index <> was up 12.75
points, or 0.51 percent, at 2,521.07.
A rise in banking shares bolstered European equities, with
UniCredit <CRDI.MI>, BNP Paribas <BNPP.PA> and ING <ING.AS>
among the top positive weights on the broader market, rising
between 1.3 percent and 4 percent.
Oil majors BP <BP.L>, Royal Dutch Shell <RDSa.AS> and Total
<TOTF.PA> fell 0.6 to 1.7 percent, reflecting the drop in crude
oil from last week's record highs above $135.
U.S. light sweet crude oil <CLc1> rose 5 cents to $126.67.
"What is certainly supportive to the equity markets is the
oil price coming down a bit and we hope of course they will
fall further and decrease inflationary fears," said Philippe
Gijels, a European strategist at Fortis Bank in Brussels.
The FTSEurofirst 300 index <> of top European shares
rose 0.3 percent to close at 1,334.39 points, bringing losses
for May to about 0.3 percent.
Also in May, London's FTSE 100 index <> fell 0.5
percent while Frankfurt's DAX <> gained for a second
straight month, rising 2 percent, and Paris' CAC 40 <>
rose 0.1 percent.
While the U.S. reading was tame, inflation in the euro zone
surged to a record 3.6 percent in May and fresh data pointed to
an economic slowdown, cementing expectations the ECB will keep
inflation rates on hold this year.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.06 percent at 72.929, and against
the yen <JPY=>, it was down 0.03 percent at 105.47.
The euro <EUR=> was up 0.19 percent at $1.5544.
U.S. Treasury debt prices rose.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
8/32 to yield 4.05 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added one-half point to yield 4.72.
Asian stocks rose, led by exporters in Japan, as fears of a
deep U.S. recession receded but gains were capped by worries
that inflation will cut into growth and boost borrowing costs.
MSCI's pan-Asian equities index <.MIAS00000PUS> edged up
0.1 percent, led by Japan. However, the index was down 1
percent in May after a steep rebound in April, and has lost
more than 5 percent so far this year.
Asian stocks excluding Japan <.MIAPJ0000PUS> gained only
0.1 percent on the day and were down 2.2 percent in May,
according to MSCI.
(Reporting by Kristina Cooke, Chris Reese and Vivianne
Rodrigues in New York and Amanda Cooper, Jamie McGeever,
Sitaraman Shankar and Alastair Sharp in London)
(Reporting by Herbert Lash)
