* Stocks rise as oil's drop buffs corporate profit outlook
* Oil dips below $112 barrel on weak demand, strong dollar
* Dollar rises to 6-month high vs euro, up 5 pct in August
* Gold, other metals tumble in broad sell-off
* U.S. government bonds gain on outlook inflation to wane
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 15 (Reuters) - A growing perception among
investors that growth in Europe is slowing just as a U.S.
recovery begins drove the dollar higher and pushed oil prices
to three-month lows on Friday, lifting both U.S. and European
shares.
The dollar climbed to a six-month high against the euro,
knocking gold and other metals prices down, along with oil, and
bolstering the outlook for economic growth and profits among
U.S. equity investors.
Oil hit a more than three-month low at $111.34 on the
stronger dollar and a view that demand in industrialized
nations is waning. Gold tumbled below $800 an ounce, hitting
its lowest price since last November, while silver sank nearly
10 percent and other precious metals also plummeted.
The drop in commodities prices raised hopes on Wall Street
of a consumer spending recovery, although the slide in crude
prices pushed down shares of materials and energy-related
companies.
Big manufacturers and airlines, whose earnings suffer when
fuel costs rise, gained. They also got a boost from a surprise
reading of manufacturing activity in New York state in August.
"The energy components and the commodity components are
weighing on the averages as oil and gold fall. The stronger
dollar is a negative anchor on anything commodity-related,"
said Michael James, senior trader at regional investment bank
Wedbush Morgan in Los Angeles.
"But that's counterbalanced by a significant outperformance
of the retailers, which are a continued beneficiary of lower
oil," James said.
Shares of consumer-oriented companies such as Procter &
Gamble <PG.N> and Wal-Mart Stores <WMT.N> did well. P&G rose
2.7 percent to $71.60, and Wal-Mart, the world's biggest
retailer, jumped 2.2 percent to $59.37, as investors bet the
sales environment will improve with lower oil prices.
The Dow Jones industrial average <> rose 43.97 points,
or 0.38 percent, at 11,659.90. The Standard & Poor's 500 Index
<.SPX> added 5.27 points, or 0.41 percent, at 1,298.20. The
Nasdaq Composite Index <> slid 1.15 points, or 0.05
percent, at 2,452.52.
For the week, the Dow shed 0.6 percent, the S&P 500 edged
0.1 percent higher and the Nasdaq rose 1.6 percent.
AEROSPACE, DEFENSE DRIVE EUROPEAN STOCK GAIN
European shares also gained, as aerospace and defense
companies rallied on the stronger dollar, withstanding a heavy
drag from falling mining stocks on the lower commodities
prices.
U.S. manufacturing data that was better than expected
helped ease recessionary fears and catapulted stocks into
positive territory. Other reports showed an increase in U.S.
industrial output and consumer confidence.
The FTSEurofirst 300 index <> of top European shares
closed 0.39 percent higher at 1,190.25 points, but lost 0.8
percent over the week.
"Some of the data we have seen has been very encouraging.
The New York Fed data was quite surprising," said Stephen Pope,
chief global market strategist at Cantor Fitzgerald in London.
The New York Federal Reserve Bank reported a surprising
rise in a gauge of manufacturing in New York state in August,
the first gain since April.
European miners fell as base and precious metals eased.
Xstrata <XTA.L>, Anglo American <AAL.L>, Rio Tinto <RIO.L> and
BHP Billiton <BLT.L> all shed between 3.5 and 7 percent.
The dollar was on track for a fifth week of gains against
the euro, amid signs the U.S. economic slowdown may be
bottoming while growth in the euro zone stalls.
CHANGING VIEW ON ECONOMY SPURS DOLLAR
The dollar has rallied broadly, rising more than 5 percent
against the euro in August, as the view on the global economy's
ability to withstand a U.S.-initiated downturn shifts.
The U.S. manufacturing data came a day after reports that
showed the euro-zone economy contracted in the second quarter
for the first time since the common currency's inception.
"The (U.S.) data has not been outstanding, but it has been
positive enough not to stand in the way of those dollar gains,"
said Vassili Serebriakov, a currency strategist at Wells Fargo
Bank in New York.
The euro <EUR=> fell 0.89 percent to $1.4675, and the
dollar rose against major currencies. The U.S. Dollar Index
<.DXY> rose 0.68 percent at 77.181.
Against the yen, the dollar <JPY=> rose 0.69 percent to
110.49.
U.S. crude <CLc1> settled down $1.24 at $113.77 a barrel,
after dipping to $111.34, the lowest level since May 2. London
Brent <LCOc1> lost $1.13 to settle at $112.55 a barrel.
"It looks like we might be trying to find a short-term
price floor," said Simon Wardell, an oil analyst at Global
Insight. "We might get to $110. How quickly we get there would
depend on the demand outlook."
Supply has been rising as demand ebbs. Output from the
Organization of the Petroleum Exporting Countries rose 145,000
barrels per day in July to 32.8 million bpd, the International
Energy Agency said this week.
The December gold contract <GCZ8> settled down $22.40 at
$792.10 an ounce in New York.
The Reuters/Jefferies CRB Index <.CRB> fell 1.84 percent
to 382.30. The index has dropped about 20 percent since hitting
a high above 473 in July.
U.S. Treasuries rose as the lower oil prices and more
subdued inflation expectations among American consumers
supported a budding view that inflation is on the wane.
Consumers' expectations for one-year inflation fell to 4.8
percent in early August from 5.1 percent in July, the biggest
one-month drop since September 2006, a Reuters/University of
Michigan survey showed.
"Bond investors believe the worldwide commodity price boom
is at an end as the prospects for growth outside the U.S. start
to dim," said Chris Rupkey, chief financial economist at Bank
of Tokyo/Mitsubishi.
"If the economy is weakening, then bonds are always the
place to be and investors are jumping into the bond market with
both feet today," Rupkey said.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
13/32 to yield 3.85 percent. The 30-year U.S. Treasury bond
<US30YT=RR> gained 30/32 to yield 4.47 percent.
Asian stocks edged lower amid investor apprehension about
the extent of potential recessions in the world's major
economies and how it would hit corporate Asia's bottom line.
Japan's Nikkei share average <> rose 0.5 percent, but
remained in a relatively tight trading range the past month.
Outside Japan, stocks in Asia-Pacific fell 0.7 percent to a
17-month low, according to an MSCI index <.MIAPJ0000PUS>.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Ellen
Freilich and Frank Tang in New York and Patrizia Kokot, Golnar
Motevalli and Jan Harvey in London; Writing by Herbert Lash;
Editing by Leslie Adler)
