* HSBC's Oct China PMI hits 18-month high of 55.4
* Equities markets extend slide, dollar index weakens
* U.S. lender CIT Group files for bankruptcy
(Updates throughout)
By Barbara Lewis
LONDON, Nov 2 (Reuters) - Oil rose towards $78 a barrel on
Monday, recovering from the previous session's drop, after
manufacturing data from China revived expectations economic
recovery would generate extra fuel demand.
But traders and analysts said the mood was still cautious as
equities markets sank to one-month lows and braced for the
possible withdrawal of stimulative monetary policy as major
central banks meet this week.
U.S. crude for December delivery <CLc1> rose 95 cents to
$77.95 a barrel by 1035 GMT, reversing some of Friday's loss of
$2.87. Brent crude <LCOc1> rose $1.12 to $76.32.
Monday's gains followed news HSBC's China Purchasing
Managers' Index (PMI) had risen for the seventh straight month
in October, to an 18-month high of 55.4, pointing to sustained
strength in the country's vast manufacturing sector.
[]
"Chinese demand is a straw in the wind," said Christopher
Bellew of brokerage Bache Financial.
"But patchy, fragile are the sort of words being used to
describe recovery. There is no real sign of demand increasing."
FAILURE TO HOLD ABOVE $80
After hitting a high for this year of $82 a barrel in late
October, U.S. crude failed to sustain gains above $80.
Its 3.6 percent fall on Friday followed data from the United
States, the world's biggest energy consumer, showed weaker
consumer sentiment in October and consumer spending cuts in
September.
The figures also dragged down equities markets, which
extended losses on Monday as investors anticipated a week of
meetings at major central banks, including the U.S. Federal
Reserve and European Central Bank.
World stocks as measured by MSCI <.MIWD00000PUS> were down
0.9 percent, adding to last week's more than 4 percent loss, the
largest since early March just before the rally began.
Adding to the negative mood, CIT Group Inc <CIT.N>, a U.S.
lender to hundreds of thousands of small and medium-sized
businesses, filed for bankruptcy on Sunday. []
During the protracted equities rally that set in March, oil
markets mostly moved higher in conjunction with stock market
gains, while being negatively correlated to the U.S. dollar.
The dollar edged lower against a basket of currencies on
Monday <.DXY>, potentially lending modest support to oil and
other dollar-denominated commodities, which become cheaper for
non-dollar investors when the U.S. currency falls.
(Additional reporting by Alex Lawler and Fayen Wong; Editing
by William Hardy)
