(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
* Crude oil retreats further to less than $123 a barrel
* U.S. stocks rise on economic data; European stocks fall
*
By Herbert Lash
NEW YORK, June 4 (Reuters) - Oil extended its decline and
Wall Street stocks edged higher on Wednesday after the U.S.
economy showed signs of resilience and credit worries abated
from the recent sessions when Lehman Brothers' stock fall had
triggered alarm.
Investors were encouraged by a 5.2 percent rebound in the
stock price of Lehman Brothers Holdings Inc <LEH.N>, which
gained after bond manager Dan Fuss, a well-known investor at
Loomis Sayles, said he had been buying debt of the Wall Street
brokerage and considered its stock "dirt cheap."
Merrill Lynch also raised its recommendation on Lehman to
buy, helping lift the company's stock 4.4 percent.
Lehman had been a big drag on stocks, falling 18 percent
since last Thursday on reports it was looking to raise new
capital.
U.S. Treasury debt prices fell, reversing their recent
flight to quality gains, and the dollar rose on the economic
data that was stronger than economists had expected.
Earlier in the day European stocks fell to their lowest
close in six weeks weighted down by oil company stocks, which
tracked the sharp fall in crude. Euro zone and British
government debt rose on soft economic data in Europe and on
renewed concerns about the global financial system.
Oil fell below $123 a barrel to its lowest in nearly three
weeks because of increases in U.S. fuel inventories and a price
rise in Asia, which is expected to curb demand.
Gold steadied in late European trading after falling nearly
1 percent as a slightly weaker dollar against the euro buoyed
the market. Sliding oil prices, which reduced gold's appeal as
an inflation hedge, were expected to pressure bullion.
A report from ADP Employer Services showed an unexpected
gain in U.S. private sector employment last month. The data is
closely watched as a prelude to Friday's government non-farm
payrolls report.
A separate report from the Institute for Supply Management
showed the U.S. services sector, which makes up the bulk of the
economy, expanded for a second-straight month.
"Once you get away from financials, the economy seems to
have dodged the bullet," said Jim Awad, chairman of W.P.
Stewart and Co. Ltd. in New York, commenting on the stronger
than expected ADP and ISM data for May.
Before 1 p.m., the Dow Jones industrial average <>
rose 51.54 points, or 0.42 percent, at 12,454.39. The Standard
& Poor's 500 Index <.SPX> gained 6.72 points, or 0.49 percent,
at 1,384.37. The Nasdaq Composite Index <> rose 32.28
points, or 1.30 percent, at 2,512.76.
European stocks slipped 1.3 percent, with the pan-European
FTSEurofirst 300 <> ending at 1,311.79 points.
The index closed off lows after the better-than-expected
reading on the U.S. service sector report.
Oil stocks were the heaviest-weighted losers. BP <BP.L>
slid 3.9 percent, Royal Dutch Shell <RDSa.L> lost 2.9 percent
and Total <TOTF.PA> fell 3.8 percent.
"The way oil and gas move is literally the way the market
moves, because they are so heavily weighted," strategist Elin
Ottosson at Cazenove said.
Crude's fall boosted airline stocks, making the sector the
top gainer in Germany, France and Britain. Deutsche Lufthansa
<LHAG.DE> gained 2.8 percent, while British Airways <BAY.L> and
Air France-KLM <AIRF.PA> both jumped 5.6 percent each.
British government bonds rose after data showed the UK
services sector contracted in May for the first time in more
than five years. Euro zone government debt rallied on renewed
concerns about the global financial system and services
activity in the euro zone slipped close to contraction.
The two-year Schatz yield <EU2YT=RR> fell 5 basis points to
4.33 percent and the 10-year Bund yields <EU10YT=RR> slipped 3
basis points to 4.41 percent. Yields move opposite to price.
Losses in the U.S. debt market were limited as investors
were unwilling to take on any radical new positions ahead of
Friday's non-farm payrolls report, which is seen as a key
indicator of the U.S. economy's health.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32 to yield 3.93 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 16/32 to yield 4.65 percent.
Oil has fallen since touching a record high over $135 a
barrel in late May. Dollar weakness, which makes
dollar-denominated commodities relatively cheap, had been a
major factor in oil's rise to record peaks last month.
U.S. light sweet crude oil <CLc1> fell $1.37 to $122.94.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.08 percent at 73.391.
Against the yen, the dollar <JPY=> fell 0.07 percent at
105.00 and the euro <EUR=> rose 0.01 percent at $1.5446.
Asian shares rose amid lingering jitters over the financial
sector's vulnerability to the global credit crisis.
Japan's Nikkei share average <> closed up 1.6 percent,
and MSCI's index of shares in the Asia-Pacific region outside
Japan <.MIAPJ0000PUS> was up 0.2 percent.
(Reporting by Walker Simon, John Parry, Gertrude
Chavez-Dreyfuss and Nick Olivari in New York and Ikuko Kao and
Jan Harvey)
(Reporting by Herbert Lash. Editing by Richard Satran)
