* U.S. stocks rise on bargain hunting, Google
* Yen gains broadly as risk appetite fades
* Oil rises on expectations OPEC to cut supplies
(Recasts with close of European markets, U.S. stocks higher,
freshens pricings)
By Herbert Lash
NEW YORK, Oct 17 (Reuters) - U.S. and European stocks rose
sharply on Friday, as energy shares rose on higher oil prices
on expectations that OPEC could cut output next week.
Reassuring results from Web search leader Google <GOOG.O>
and IBM <IBM.N> buoyed the U.S. technology sector, driving the
Dow industrials above 9,000.
But fears of recession still gripped some markets as
reports showed U.S. consumer sentiment suffered its steepest
monthly drop on record in October and housing construction
starts fell to a 17-1/2-year low last month, driving the dollar
down against the yen in choppy trade.
A safe-haven bid for Treasuries, however, was curbed as
U.S. stocks turned higher.
Crude prices jumped 5 percent, drawing support from rising
expectations of a supply cut by the Organization of Petroleum
Exporting Countries after the oil cartel brought an emergency
meeting forward to next week.
U.S. light sweet crude oil <CLc1> rose $3.51 to $73.36 a
barrel.
Spot gold prices <XAU=> fell $14.50 to $790 an ounce.
Bargain hunters were encouraged by famed investor Warren
Buffett who wrote in The New York Times that with fear high in
the minds of many investors, it was time to buy U.S. stocks.
In Europe shares gained 4.2 percent, ending a volatile week
on a strong note thanks to energy stocks that tracked a
recovery in crude, while drugmakers rose ahead of key company
reports next week.
"What helps is that we've ended the week in the same way it
started, on an upbeat note," said Mike Lenhoff, chief
strategist at Brewin Dolphin.
"I somehow felt that although this week was marked by just
as much volatility as last week, it had a different feel. There
was encouragement from the steps the governments have been
taking (to deal with the banking crisis)," Lenhoff said.
The pan-European FTSEurofirst 300 finished the week 6.3
percent higher.
In U.S. markets, bargain hunting for beaten-down shares
also bolstered shares.
The Dow Jones industrial average <> was up 183.98
points, or 2.05 percent, at 9,163.24. The Standard & Poor's 500
Index <.SPX> was up 23.06 points, or 2.44 percent, at 969.49.
The Nasdaq Composite Index <> was up 35.25 points, or 2.05
percent, at 1,752.96.
Google jumped 8.7 percent to $383.66 after reporting
forecast-beating results late on Thursday that offered
investors relief that the company could weather the economic
downturn.
Shares of IBM rose 3.4 percent to $94.61 after the
technology services company said it expects to meet long-term
profit forecasts.
But some companies warned of quickly slowing economic
growth.
Schlumberger Ltd <SLB.N>, the world's largest oilfield
services company, warned that the credit crisis and softening
global economy could trim spending expectations in the oil and
gas industry next year. Its shares fell 5.6 percent.
Honeywell International Inc <HON.N> cut its fourth-quarter
profit forecast below Wall Street's expectations and said it is
bracing for "recessionary conditions" in the United States and
Europe next year, sending its shares down 6 percent.
Analysts said options expirations could increase stock
market volatility on Friday.
The FTSEurofirst 300 <> index of top European shares
closed up 4.2 percent at 894.77 points. The index has lost 39.9
percent this year on recession worries and the effects of
banking failures.
Oil groups BP <BP.L>, Total <TOTF.PA> and Royal Dutch Shell
<RDSa.L> climbed between 8.6 percent to 9.7 percent after big
declines the previous day.
Defensive drug stocks also rose. Roche <ROG.VX> and
Novartis <NOVN.VX>, which report results next week, gained 10.4
percent and 12 percent, respectively.
"This is the most volatile week we've seen," said Thierry
Lacraz, strategist at Swiss bank Pictet in Geneva. "The sole
intelligent thing is to remain on the sidelines and not make
any huge bets."
Longer-dated euro zone government debt rose, also in choppy
trade, briefly pushing the 10-year yield below 4 percent for
the first time in a week as the sour U.S. economic data
underpinned demand for safer assets.
But U.S. government debt wavered as rising stocks tempered
the flight to safety.
"Along with everyone else, the eyes of Treasuries investors
are glued to what's going on in the stock market," said Chris
Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi.
"When stocks go up, the bid for Treasuries goes down. When
stocks go down, the bid for Treasuries comes back."
U.S. Treasuries pared gains to trade lower.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
6/32 in price to yield 3.99 percent, while the 2-year U.S.
Treasury note <US2YT=RR> slid 2/32 in price to yield 1.66
percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.06 percent at 82.336.
The euro <EUR=> fell 0.24 percent at $1.3452. Against the
yen, the dollar <JPY=> fell 0.01 percent at 101.59.
With signs of economic trouble now emerging in Eastern
Europe and Asia, investors have reversed risky trades financed
with low-yielding yen, helping lift the Japanese currency at
the expense of its higher-yielding rivals, such as the euro.
Spot gold prices <XAU=> fell $14.50 to $790 an ounce.
Gold fell more than 3 percent, extending the previous
session's losses, as the dollar firmed against the euro, and
investors sold bullion to cover losses on other markets.
Enormous price volatility has taken a toll on investment
sentiment, triggering margin calls and massive liquidation in
the gold market, said Leonard Kaplan, president of Prospector
Asset Management.
(Reporting by Ellis Mnyandu, Steven C. Johnson, Ellen Freilich
in New York and Joe Brock, Ian Chua, Tyler Sitte and Jan Harvey
in London; Writing by Herbert Lash; Editing by Leslie Adler)
