* Citigroup lifts European shares; tech fall weighs in US
* Oil rise dents hopes slide this week will help economy
* Dollar bolstered on Citigroup's less-than-expected loss
* Govt bond prices fall as flight to safety bid unwinds
By Herbert Lash
NEW YORK, July 18 (Reuters) - Favorable results by top U.S.
bank Citigroup caused European shares to rally but U.S.
equities were little changed on Friday as credit concerns still
loomed and oil's slight rise stalled economic optimism after
its slide this week.
Crude oil briefly touched a six-week low as speculation
grew of a more conciliatory tone ahead of talks on Saturday
between Iran and Western diplomats on Tehran's nuclear
ambitions.
Crude prices fell $15 over the previous three days,
sparking hopes that inflation pressures might ease and economic
growth wouldn't suffer after had shot toward $150 a barrel.
The dollar rose against major currencies after Citigroup's
less-than-expected quarterly loss eased the grim outlook that
some investors held for the health of the U.S. financial
sector.
U.S. and euro zone government debt prices fell as
Citigroup's results caused investors to unwind their recent
flight to safety. The yield on the 10-year Bund <EU10YT=RR>
surged to a two-week high of 4.58 percent in the biggest
single-day climb in about four months.
Results at Citigroup <C.N>, the largest U.S. bank by
assets, followed surprisingly strong earnings from Wells Fargo
& Co. WFC.N and JP Morgan Chase & Co. <JPM.N> earlier this week
that also lifted equity markets.
But even as Citigroup's results buoyed investors,
disappointing quarterly results from both Google Inc <GOOG.O>
and Microsoft Corp <MSFT.O> drove a technology sell-off,
helping to send the Nasdaq down more than 1 percent.
Before 1 p.m., the Dow Jones industrial average <> was
up 2.36 points, or 0.02 percent, at 11,449.02. The Standard &
Poor's 500 Index <.SPX> was down 4.30 points, or 0.34 percent,
at 1,256.02. The Nasdaq Composite Index <> was down 34.86
points, or 1.51 percent, at 2,277.44.
Citigroup posted a smaller-than-expected second-quarter
loss of $2.5 billion, despite $11.7 billion of write-downs and
credit losses. Its shares rose more than 10 percent to $19.88.
Investors have long sought signs the New York-based bank,
one of the hardest hit in a global credit crisis that began
last summer, may finally be ready to turn a corner.
But Citigroup Chief Financial Officer Gary Crittenden on a
conference call warned consumer credit costs might have a
"meaningful" impact on results for the rest of the year.
"Citi is exposed to every aspect of the economy," said Matt
McCormick, an analyst at Bahl & Gaynor Investment Counsel in
Cincinnati. "It's not like the movies where all of a sudden you
say, 'And they all lived happily ever after.'"
Google posted a weaker-than-expected 35 percent rise in
profit, while Microsoft's forecast fell below Wall Street's
expectations. Google shares fell 8.68 percent to $487.13, and
Microsoft fell 7.34 percent to $25.50.
Other tech decliners were iPod maker Apple Inc <AAPL.O> and
BlackBerry device maker Research In Motion
Ltd_<RIM.TO><RIMM.O>.
Bucking a trend in tech earnings, computer services company
IBM <IBM.N> reported a 22 percent rise in profit. IBM's sahres
rose 2.67 percent to $129.90.
In Europe, Citigroup spurred a rally in financial stocks.
The FTSEurofirst 300 index <.FTEU> of top European shares
closed 1.56 percent higher at 1,164.19 points, and gained about
3.2 percent for the week.
The DJStoxx European banks index <.SX7P> was 4.8 percent
higher.
UBS <UBSN.VX> jumped 7.6 percent and Royal Bank of Scotland
<RBS.L> soared 9.6 percent.
"Citigroup created a huge amount of positive excitement for
the very reason that they are not as bad as expected and the
markets gave them the benefit of the doubt," said Howard
Wheeldon, senior strategist at BGC Partners.
The dollar's rise reversed a down-trend for several years.
The latest downleg was sparked by concerns about the ability of
large banks and other institutions to cope with defaults on
imprudent home loans made during the housing bubble.
"Citi earnings have encouraged the market to take on more
risk and given (the dollar) a lift," said Stephen Malyon,
senior currency strategist at Scotia Capital in Toronto. They
were "consistent with other bank earnings seen earlier this
week which has turned sentiment around on the dollar a little
bit."
U.S. Treasury debt prices were lower.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 20/32 to yield 4.07 percent. The 30-year U.S. Treasury
bond <US30YT=RR> was down 21/32 to yield 4.65 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.16 percent at 72.143. Against the yen,
the dollar <JPY=> was up 0.43 percent at 106.71.
The euro <EUR=> was down 0.09 percent at $1.5846.
Gold was softer but recovered from a more than 1 percent
dip earlier in the day.
U.S. light sweet crude oil <CLc1> rose $1.31 to $130.60 a
barrel.
Spot gold prices <XAU=> rose $1.50 to $958.10 an ounce.
The precious metal slipped to a one-week low in early
afternoon trade after Citigroup's results boosted the dollar
and sent equity markets higher in Europe.
Asian stocks fell, hurt by resource-related shares stung by
oil's decline this week and by Merrill Lynch's weak results.
Japan's Nikkei share average <> slipped 0.7 percent
for its sixth straight losing week.
Shares in the Asia-Pacific region outside of Japan fell 1.1
percent, according to an MSCI index <.MSCIAPJ>, and were within
striking distance of Wednesday's 16-month low.
(Reporting by Ellis Mnyandu, Nick Olivari and Ellen Freilich
in New York, and Patrizia Kokot, Santosh Menon, Ikuko Kao, Jan
Harvey in London; Writing by Herbert Lash; Editing by Leslie
Adler)
