* Oil to 6-month high above $66 on economic outlook
* US dollar tumbles to 5-month lows as risk aversion eases
* Global shares surge to 2009 highs on recovery hopes
* Government debt keeps firm tone after vicious week
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, May 29 (Reuters) - Oil prices surged to a fresh
six-month high and the U.S. dollar slipped to a five-month low
against major currencies on Friday on more evidence from around
the world that the economic downturn may be easing.
Global stocks rose and some equities markets posted 2009
highs, eroding the safe-haven allure of U.S. dollar-based
assets, and sending the euro <EUR=> to a 2009 high against the
dollar.
U.S. Treasury and euro zone debt prices recovered with the
help of mixed economic data and relief over a pause in
government bond auctions, allowing the 30-year U.S. long bond
to recover more than one full point on the day.
Bonds also got a slight safe-haven boost from data showing
the U.S. economy contracted at an annual rate of 5.7 percent in
the first quarter, a slightly smaller drop than initially
estimated but worse than analysts' expectations. For details,
see []
U.S. gold futures rose above $980 an ounce to a three-month
high as resurgent risk appetite pummeled the dollar.
The Reuters-Jefferies CRB index <.CRB>, a global
commodities benchmark, surged to nearly a seven-month high as
the prices for oil, copper, and corn rallied on a weaker dollar
and news suggesting economic recovery was underway.
U.S. light sweet crude oil <CLc1> rose $1.32 to $66.40 a
barrel.
The U.S. economy contracted slightly less than initially
estimated in the first quarter, while corporate profits
rebounded, according to a government report that pointed to
moderation in the recession. []
Japanese factory output jumped in April at the fastest rate
in more than half a century, and manufacturers forecast further
gains despite only tentative signs that global demand is on the
rebound from the worst recession in decades. []
"There's some momentum that could last for another couple
of months," said Georgina Taylor, equity strategist at Legal &
General Investment Management. "But due to the rally, I think
the market has become more sensitive to newsflow.
"The story is still the same," she said, "but the movements
may be smaller in magnitude. On the whole, data is surprising
on the upside."
Among other welcome signs German retail sales unexpectedly
rose in April, raising hopes that consumer spending could help
support Europe's biggest economy after a record slump in gross
domestic product in the first quarter, official data showed.
[]
And in Britain, house prices rose for the second time in
three months in May as the consumer mood steadied and a top
retailer enjoyed its best week this year. []
But U.S. government debt prices rose as other data
suggested lingering economic weakness and reminded investors
that the road to recovery will be bumpy. Business activity in
the U.S. Midwest contracted in May at a more severe rate than
expected.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
23/32 in price to yield 3.52 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 1/32 in price to yield 0.93 percent.
The benchmark 10-year Bund yield <EU10YT=RR> was on track
for its biggest monthly rise since December 2001, according to
Reuters charts.
U.S. stocks traded flat to slightly higher as rising oil
prices lifted energy stocks, and European shares closed higher,
with oils and miners rising on stronger commodities prices.
At 1 p.m. (1700 GMT), the Dow Jones industrial average
<> was up 2.07 points, or 0.02 percent, at 8,405.87. The
Standard & Poor's 500 Index <.SPX> was up 1.82 points, or 0.20
percent, at 908.65. The Nasdaq Composite Index <> was down
2.10 points, or 0.12 percent, at 1,749.69.
The FTSEurofirst 300 <> index of top European shares
rose 0.2 percent to 862.17 points, gaining 0.7 percent for the
week. In May, the index rose 4.0 percent, a third straight
monthly gain and its best winning streak in two years.
The U.S. dollar fell against a basket of major currencies,
with the Dollar Index <.DXY> down 1.45 percent at 79.362.
Against the yen, the dollar <JPY=> was down 1.53 percent at
95.46.
The euro <EUR=> was up 1.44 percent at $1.4137.
Japan's Nikkei share average <> rose 0.75 percent to a
seven-month high, and the MSCI index of Asia Pacific stocks
outside Japan <.MIAPJ0000PUS> rose 1.6 percent to its highest
since Oct. 3.
(Reporting by Chuck Mikolajczak, Burton Frierson and Vivianne
Rodrigues in New York; Brian Gorman and George Matlock in
London; writing by Herbert Lash)
