* US dollar tumbles to 5-month lows as risk aversion eases
* Oil rises to 6-month high above $66 on economic outlook
* Global shares surge to 2009 highs on recovery hopes
* Government debt keeps firm tone after vicious week
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, May 29 (Reuters) - The U.S. dollar slumped to a
five-month low against major currencies, helping drive oil
prices to a fresh six-month high on Friday, as evidence mounted
that a worldwide recession may be easing.
Global stocks rose with some markets posting 2009 highs,
which eroded the safe-haven allure of dollar-based assets and
sent the euro <EUR=> above $1.41 for the first time this year.
Concern about the expanding amount of debt needed to fund a
record $1.8 trillion U.S. budget deficit added to dollar woes
this week and put the benchmark 10-year Treasury yield en route
to its biggest two-month spike since 2004.
"There's a visceral concern about the debasement of the
U.S. currency because the United States has a lot of debt to
finance," and may have to print more money to do it, said Alan
Ruskin, chief international strategist at RBS Greenwich Capital
in Greenwich, Connecticut.
Bonds 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
[]
Gold futures settled above $980 an ounce at a three-month
high as resurgent risk appetite pummeled the dollar.
The Reuters-Jefferies CRB index <.CRB>, a global
commodities benchmark, surged to more than a six-month high as
prices for oil, copper and corn rallied on a weaker dollar and
hopes for economic recovery.
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. []
"It's clear to me, based on the market action, that we've
turned a corner in this economy," said Sasha Kostadinov,
portfolio manager and research analyst at Shaker Investments in
Cleveland.
In Japan, 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.
[]
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.
[]
Also on Friday, house prices in Britain rose for in May
marking the second monthly gain in three as the consumer mood
steadied and a top retailer enjoyed its best week of 2009.
[]
But U.S. government debt prices rose as some 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
1-7/32 in price to yield 3.46 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 2/32 in price to yield 0.92 percent.
The benchmark 10-year Bund yield <EU10YT=RR> was on track
for its biggest monthly rise since December 2001, according to
Reuters charts.
On Wall Street, stocks capped their third straight monthly
advance as rising commodity prices lifted shares of natural
resource companies, while a sliding dollar boosted the allure
of multinationals including Coca-Cola Co <KO.N>.
U.S. stocks traded higher as rising oil prices lifted
energy stocks, and European shares closed higher, with oils and
miners rising on stronger commodities prices.
The Dow Jones industrial average <> rose 96.53 points,
or 1.15 percent, to end at 8,500.33. The Standard & Poor's 500
Index <.SPX> added 12.31 points, or 1.36 percent, to 919.14.
The Nasdaq Composite Index <> gained 22.54 points, or 1.29
percent, to close at 1,774.33.
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 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 1.53 percent at 79.297.
Against the yen, the dollar <JPY=> weakened 1.73 percent to
95.26.
The euro <EUR=> firmed 1.45 percent to $1.4138.
U.S. crude oil for July delivery <CLc1> settled up $1.23 at
$66.31, its highest settlement since last Nov. 4, after earlier
hitting $66.47, the highest intraday trade since Nov. 5.
London Brent crude <LCOc1> settled up $1.13 at $65.52, its
highest settle since Nov. 4.
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.
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