* Commodity prices fall pressuring world stocks
* U.S. dollar falls vs euro, yen after low inflation data
* U.S., euro zone government debt rises after tame CPI
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, June 17 (Reuters) - Commodity prices slipped on
Wednesday as confidence in a swift recovery ebbed, helping pull
down stock markets in Europe, while crude oil fell toward $70 a
barrel on a surprise increase in U.S. gasoline supplies.
A tame reading of U.S. consumer prices helped lift the
price of inflation-sensitive government debt on both sides of
the Atlantic, and helped spur weakness in the U.S. dollar.
Amid doubts about economic recovery, benchmark dollar bank
lending rates set record lows on Wednesday in an environment of
easier credit conditions with few disruptions seen in the
interbank market before the end of June.
U.S. stocks rebounded at midday after a downgrade of 22
banks by Standard and Poor's and a disappointing earnings
outlook from economic bellwether FedEx Corp <FDX.N> weighed on
Wall Street earlier in the session.
The Nasdaq rose more than 1.0 percent as investors snapped
up technology shares after a two-day sell-off, while both the
Dow and the S&P 500 clung to modest gains as healthcare
advanced.
Tech shares were helped after Goldman Sachs added chipmaker
Qualcomm <QCOM.O> to its "conviction buy" list while Banc of
America Securities-Merrill Lynch upgraded to "buy" from
"underperform" rival Texas Instruments <TXN.N>.
Networking equipment maker Cisco <CSCO.O> also underpinned
a tech rally after Chief Executive John Chambers said business
conditions were improving.
At 1 p.m. (1700 GMT), the Dow Jones industrial average
<> was up 14.51 points, or 0.17 percent, at 8,519.18. The
Standard & Poor's 500 Index <.SPX> was up 0.56 points, or 0.06
percent, at 912.53. The Nasdaq Composite Index <> was up
12.53 points, or 0.70 percent, at 1,808.71.
Drugmakers and telecoms stocks also gained in Europe, but
commodity-related pulled a leading index of regional shares
down for the fourth consecutive day.
"There is a complete lack of clarity as to the state of the
underlying economy both here and in the America," said Tim
Whitehead, head of portfolio strategist at Redmayne-Bentley,
based in Leeds, England.
"Although it would be nice to call a bottom of the economic
nadir, we are not there yet. We have no evidence to support a
sustained market rally from here."
The FTSEurofirst 300 <> index of top European shares
fell 1.9 percent to a month-low of 845.76 points, but remains
up 1.7 percent year-to-date.
"After one of the biggest rallies in history, the air was
getting thin on the upside," said Lars Kreckel, equity
strategist at Exane BNP Paribas in London.
Oil prices fell. Gasoline stocks rose by 3.4 million
barrels, the Energy Information Administration said, countering
analysts's expectations of a fall. That was offset by a big,
3.9 million barrel drop in crude inventories. []
U.S. light sweet crude oil <CLc1> fell 25 cents to $70.22 a
barrel.
Copper hit a near two-week low before tracking back as the
dollar's weakness helped erase larger metal losses from earlier
in the session. A weak dollar makes metals priced in dollars
less expensive for holders of other currencies. []
Spot gold prices <XAU=> rose 80 cents to $934.90 an ounce.
U.S. consumer price data for May affirmed expectations that
benchmark U.S. interest rates will remain low for some time, a
relief to investors worried about a recent surge in Treasury
yields, which has since abated somewhat.
U.S. consumer prices rose a meager 0.1 percent in May, but
over the past 12 months price registered the biggest drop in
nearly 60 years.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
13/32 in price to yield 3.60 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 2/32 in price to yield 1.14 percent.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.12 percent at 80.644.
The euro rose 0.3 percent against the dollar to $1.3871
<EUR=EBS>, while against the yen, the dollar <JPY=> was down
0.80 percent at 95.60.
Most Asian stocks fell for a fourth day, weighed by
resource-related shares and doubts about a global recovery. The
MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS>
fell 0.8 percent. Japan's Nikkei share average <> rose 0.9
percent on bargain hunting.
(Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss,
Richard Leong in New York; Dominic Lau, Ian Chua, Joe Brock,
Alex Lawler, Maytaal Angel and Michael Taylor in London and
Peter Starck in Frankfurt; writing by Herbert Lash)
