* Oil rises toward $72 on signs of U.S. demand recovery
* Market unease over China lifts yen, but euro resilient
* Debt prices climb as investors go for lower risk assets
* China losses shake fragile economic confidence
(Updates with U.S. markets activity, changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Aug 19 (Reuters) - U.S. stocks rebounded and oil
jumped to almost $72 a barrel on Wednesday after data suggested
a recovery in U.S. oil demand, a surprise for investors who had
been fretting over a sharp slide in Chinese equities.
A U.S. government inventory report showed a huge drop in
crude supplies last week, which boosted oil futures more than 4
percent at one point and lifted Wall Street sentiment that had
turned dour after a 4.3 percent a drop in the Shanghai
Composite Index <>.
The drop took losses on the key Chinese index to 20 percent
over the past two weeks, a plunge hard for investors to ignore
considering China's role in any global recovery.
Copper fell to its lowest level in just over two weeks, and
government debt prices in Europe and the United States rose as
investors sought havens in less risky assets.
But oil reversed early losses after the U.S. Energy
Information Administration (EIA) said crude stocks fell by 8.4
million barrels last week, confounding analyst expectations for
a rise of 1.3 million barrels. []
"I think these (demand) changes are reflective of an
improving economy, but one must be cautious because these
changes are versus year-ago weak numbers," said API chief
economist John Felmy.
The news lifted U.S. stocks that had been down about 1
percent. The S&P Energy index <.GSPE> gained almost 2 percent,
making it the top sector performer. Exxon Mobil <XOM.N> and
Chevron <CVX.N> also rose about 2 percent each.
"Oil is helping us," said Rick Meckler, president of
LibertyView Capital Management in New York. "It's a big part of
the index and energy companies have helped turn this market
before."
After 1 p.m., the Dow Jones industrial average <> rose
71.34 points, or 0.8 percent, to 9,289.28. The Standard &
Poor's 500 Index <.SPX> added 7.78 points, or 0.8 percent, to
997.45. The Nasdaq Composite Index <> gained 13.12 points,
or 0.7 percent, to 1,969.50.
European equities ended lower after a choppy session, with
weaker financial and automobile stocks outpacing a rise in oil
and gas shares. But oil producers helped Britain's leading
share index to end slightly higher.
The FTSEurofirst 300 <> index of top European shares
closed 0.3 percent lower at 931.98 points.
The dollar fell against the yen after China's stock market
slide raised concerns about the strength of a global recovery
while boosting the Japanese currency's safe-haven appeal.
But the recovery in U.S. equities helped higher risk
currencies recover losses, and the euro pushed above $1.42 and
was on track for its biggest daily rise against the dollar in
more than two weeks.
The spike in oil prices also helped higher-risk assets and
currencies recover losses sparked by China's stock market.
"Negative sentiment hasn't disappeared but it has abated,
with both the S&P <.SPX> and Dow <> paring losses," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto. "That gave the market a chance to push the
euro higher."
The dollar hit a one-month low against the yen and was last
down 0.9 percent at 93.83 yen <JPY=>. The euro was unchanged at
133.83 yen <EURJPY=>, well above a one-month low of 132.16.
September Bund futures <FGBLU9> settled up 50 ticks at
122.67.
The benchmark 10-year U.S. note <US10YT=RR>, meanwhile,
recently traded 9/32 higher in price to yield 3.49 percent.
The MSCI index <.MIAPJ0000PUS> of Asia Pacific stocks
outside Japan slipped 0.3 percent, while Japan's Nikkei share
average <> finished 0.8 percent lower.
(Reporting by Stephen C. Johnson, Chris Reese in New York;
David Sheppard, Dominic Lau, Atul Prakash, George Matlock and
Jan Harvey in London; writing by Herbert Lash; Editing by
Leslie Adler)
