* Falling oil, U.S. consumer confidence boost stocks
* Oil falls as low as $120.42, lowest since May 6
* Dollar rises as sliding oil prices, consumer confidence
* Stock rally, oil fall curb appeal of debt as safe haven
NEW YORK, July 29 (Reuters) - A slide in oil prices rode to
the rescue on Tuesday of U.S. and European stocks slammed by
Merrill Lynch's unexpected $5.7 billion write-down, helping to
strengthen the dollar and curb safety bids for bonds.
Data showing a surprise bounce in U.S. consumer confidence
led to an stock market rebound in Europe after markets had
fallen earlier in Asia and Europe after Merrill's move late on
Monday to unload $30.6 billion in risky debt and raise $8.5
billion by selling stock.
A fall in crude prices to below $121 a barrel further
lifted sentiment from the write-down at Merrill and a raft of
dour European economic data. French consumer morale, UK retail
sales and mortgage approvals all slid to record lows.
The dollar surged to a one-month high on the renewed slide
in crude oil, while the Reuters-Jefferies CRB <.CRB> index hit
a near three-month low as the closely watched gauge of
commodity markets tracked oil's fresh dive.
For some investors, a firmer dollar may have reduced the
appeal of commodities.
U.S. stocks rose more than 1 percent, spurred by the
consumer confidence report and stronger-than-expected quarterly
results at Amgen <AMGN.O> and U.S. Steel <X.N>, among others.
But the big catalyst to stock markets was oil. U.S. light
sweet crude oil <CLc1> fell $3.25 to $121.48 per barrel.
"The oil price drop is tremendously helpful," said Jim
Awad, chairman of W.P. Stewart Asset Management in New York.
"I think people view it as relieving a major strain on the
economy, combined with a feeling that Merrill is working its
way through its problems, and combined with consumer
confidence, that was a little better than expected," he said.
Shares of Merrill Lynch <MER.N> dropped 1.4 percent to
$23.99, following a plunge of more than 11 percent in the
previous session.
Before 1 p.m., the Dow Jones industrial average <> was
up 157.95 points, or 1.42 percent, at 11,289.03. The Standard &
Poor's 500 Index <.SPX> was up 16.50 points, or 1.34 percent,
at 1,250.87. The Nasdaq Composite Index <> was up 43.45
points, or 1.92 percent, at 2,307.67.
European shares snapped a three-day losing streak on
crude's fall and the U.S. consumer confidence data, although
banks limited gains due to worries over more write-downs linked
to the simmering credit crisis.
The FTSEurofirst 300 <> index of top European shares
closed 0.3 percent higher at 1,162.57 points.
The U.S. consumer index came in at 51.9 for July, its first
rise since December, from an upwardly revised 51.0 in June --
the lowest since a reading of 47.3 in February 1992.
"This confirms a similar reading by the University of
Michigan last Friday. Both have seen a severe weakness of late
and this bounce indicates that, perhaps, consumer confidence
has bottomed out," said Bernard McAlinden, market strategist at
NCB Stockbrokers in Dublin.
"It is good news, but only at the margins," he added.
Banks remained a major drag on the FTSEurofirst 300, with
investors spooked by Merrill's write-down.
The DJStoxx European banks <.SX7P> was down 0.5 percent,
with UBS <UBSN.VX> losing 3.6 percent, Barclays dropping 4.1
percent and BNP Paribas <BNPP.PA> down 1.8 percent. The banking
index lost as much as 3.6 percent earlier in the session.
U.S. government debt prices fell. Lower energy costs and a
slight pick-up in consumer sentiment boosted the outlook for
the economy and the likelihood the Federal Reserve will raise
rates later this year to fight inflation, analysts said.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
14/32 to yield 4.06 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 20/32 to yield 4.65 percent.
The dollar extended gains, with a dollar index rising to a
one-month high, cheered by the drop in oil prices and the
unexpected rise in U.S.consumer confidence.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.88 percent at 73.318. Against the yen,
the dollar <JPY=> rose 0.66 percent at 108.15.
The euro <EUR=> fell 1.04 percent at $1.5582.
U.S. gold futures dropped sharply, trading near a one-month
bottom, as a stronger dollar, weaker oil and rebounding stocks
prompted investors to sell bullion.
Spot gold prices <XAU=> fell $12.90 to $917.40.
Asian stocks fell about 2 percent as Merrill's write-down
of bad debt drained confidence in the shaky financial sector.
Japan's Nikkei share average <> closed down 1.5
percent. Shares in the rest of the Asia-Pacific region dropped
2.1 percent, according to an MSCI index <.MIAPJ0000PUS>.
(Reporting Walter Brandimarte, Lucia Mutikani, John Parry,
Richard Leong and Frank Tang in New York, and Alex Lawler,
Patrizia Kokot and Emelia Sithole-Matarise)
(Reporting by Herbert Lash. Editing by Richard Satran)
