* Stocks gain on hopes global recession near a bottom
* Euro gains versus dollar as optimism overshadows gloom
* Oil slips toward $57 a barrel on gloomy demand outlook
* Government debt rises on U.S. jobs data, economy worries
(Updates with U.S. markets activity; dateline previously
LONDON)
By Herbert Lash
NEW YORK, May 14 (Reuters) - U.S. and European stocks rose
and credit spreads tightened further on Thursday as hopes that
a deep global recession may have bottomed gained an upper hand
over skepticism about an imminent economic recovery.
The euro rose against the dollar in choppy trade amid
modest increases in risk appetite as investors shrugged off the
latest signs of worldwide economic weakness in recent days.
Crude prices fell toward $57 a barrel after the
International Energy Agency forecast global oil consumption
will fall this year at the fastest clip since 1981.
But U.S. and euro zone government bonds rose as soft U.S.
jobs data underscored the long road to recovery from the worst
global economic slump since World War Two.
"There's a slight uptick in risk appetite despite the weak
data," said Matt Kassel, director of FX trading at ING Capital
Markets in New York.
Stock market gains limited some of the bond rally as equity
investors saw the unexpected jump in initial U.S. jobless
claims as largely influenced by the beleaguered auto sector,
whose troubles are well known following Chrysler's bankruptcy.
Worries remained about the economy, however, and investors
pushed up defensive stocks, such as consumer staples and
healthcare, sending Coca-Cola Co <KO.N> up 1.7 percent and
drugmaker Merck <MRK.N> up 2 percent.
"What we've seen the past three days is not that money's
leaving the market, but just flowing in that (defensive)
direction and trying to find the better deal," said Marc Pado,
U.S. market strategist at Cantor Fitzgerald & Co in San
Francisco.
Wal-Mart Stores Inc <WMT.N> reported a flat quarterly
profit as low prices at its discount stores attracted shoppers,
but results were limited by a stronger dollar. Wal-Mart shares
fell 1.6 percent.
Shortly after 1 p.m., the Dow Jones industrial average
<> was up 58.70 points, or 0.71 percent, at 8,343.59. The
Standard & Poor's 500 Index <.SPX> was up 9.83 points, or 1.11
percent, at 893.75. The Nasdaq Composite Index <> was up
27.27 points, or 1.64 percent, at 1,691.46.
European shares edged higher, snapping a three-day losing
run, as gains for several heavyweight banks more than offset a
drop in energy stocks on the weaker crude prices.
The pan-European FTSEurofirst 300 <> index rose 0.5
percent to close at 835.71 points. The index is up 29 percent
from the lifetime low it hit on March 9.
"The market doesn't want to give up a lot of ground," said
Mike Lenhoff, chief strategist and head of research at Brewin
Dolphin Securities in London.
"It may have got a bit ahead of itself, and may need a bit
of cooling off. But it's here because it's taking the view that
there's a recovery out there," Lenhoff said.
UBS <UBSN.VX> shares rose 4 percent on reports the Swiss
government is seeking a quick exit from its investment in the
country's biggest bank.
Paris-based IEA, adviser to 28 industrialized nations on
energy policy, said the rise in oil prices to a six-month high
above $60 this week was due to sentiment rather than supply and
demand. Consumption is set to fall by 2.56 million barrels per
day in 2009, it said.
U.S. light sweet crude oil <CLc1> was off 33 cents at
$57.69 a barrel.
"The oil price seems to have moved a bit higher in the past
month largely on the basis of equity markets and sentiment
about potential economic recovery," David Fyfe, head of the
IEA's oil, industry and markets division, told Reuters.
"But we're not seeing it in terms of the preliminary demand
data for early 2009," Fyfe said.
Copper prices tumbled to two-week lows on concerns about
Chinese demand and concerns about the economy. []
The worst economic figures in half a century from Spain,
the euro zone's fourth biggest economy, reinforced expectations
the 16-nation euro bloc will report a deepening recession in
the first quarter in data to be published Friday.
Spanish gross domestic product shrank 1.8 percent
quarter-on-quarter, after a 1 percent contraction in the final
three months of 2008.
The European Union's top economic official said the economy
is showing the first positive signs amid its biggest crisis
since the grouping's foundation 50 years ago, but it is not yet
in recovery. []
The June Bund future <FGBLc1> rose 37 ticks at 121.69,
after earlier reaching its highest level in a week at 121.94.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
unchanged in price, yielding 3.11 percent. The two-year U.S.
Treasury note <US2YT=RR> traded at break-even to yield 0.86
percent.
Bank-to-bank dollar funding costs marked a fresh low,
extending their decline and credit spreads compressed further
as the interbank money market continued its steady recovery.
Hopes that the global recession may be touching bottom and
first-quarter bank results that were not as bad as expected
have soothed a sector severely hit by the credit crisis.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.17 percent at 82.425.
The euro <EUR=> was up 0.15 percent at $1.3619, and against
the yen, the dollar <JPY=> was up 0.18 percent at 95.57.
Spot gold prices <XAU=> rose 25 cents to $925.70 an ounce.
Asian stocks fell overnight on concerns about the long road
to economic recovery. The MSCI index of Asia-Pacific shares
outside Japan <.MIAPJ0000PUS> dropped 3.3 percent, while
Japan's Nikkei average <> fell 2.6 percent.
(Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss,
Burton Frierson in New York; Brian Gorman, Ian Chua, Kirsten
Donovan and David Sheppard in London; writing by Herbert Lash;
Editing by Leslie Adler)
