* World stocks gain on better-than-expected economic data
* US dollar rises after better than expected ISM
* Oil pares gains after data shows big rise in US supplies
* Debt prices sag on better-than-expected economic data
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Feb 4 (Reuters) - World stocks rose on Wednesday
after better-than-expected U.S. and euro zone economic data
eased some of the gloom hanging over financial markets and
bolstered the U.S. dollar versus the yen and euro.
Oil pared earlier gains but held above $41 a barrel after
government data showed U.S. crude stocks increased more than
expected, a sign that demand was still slowing. Crude oil was
supported by signs OPEC might increase record supply cuts.
In government debt markets, U.S. Treasuries slumped as the
less gloomy data and the government's hefty schedule for new
issuance curbed investors' appetite for bonds, sending
benchmark yields to fresh two-month highs.
The U.S. dollar rose against the yen after data showed the
U.S. services sector was not contracting as quickly but
declines in the European currency began earlier with news of a
downgrade in Russian sovereign debt.
Reports showing the United States was hemorrhaging jobs and
may not stop bleeding for at least another year even if the
U.S. government acts quickly to stimulate the economy, were
taken in stride by investors. []
The U.S. unemployment report for January on Friday will be
key to getting a better grip on the state of the economy, said
Sung Won Sohn, professor of economics at California State
University in Camarillo, California.
"Perhaps the economy is trying to find a bottom and if we
get a string of reports like this it would be very good for
confidence in the economy," Sohn said about the ISM
non-manufacturing report.
Technology shares jumped because they would likely be the
first beneficiaries of an economic recovery.
Investors snapped up shares of Microsoft <MSFT.O> which was
up nearly 2.0 percent while Apple <AAPL.O> gained 2.7 percent.
"Some of these indicators are starting to demonstrate that
the economy is bottoming. That's sparking a rally and people
are drawing the conclusion that the worst is behind us," said
Stephen Massocca, managing director of Wedbush Morgan in San
Francisco.
"Sentiment is very, very low and it doesn't take much to
spark these rallies."
The Dow Jones industrial average <> fell 28.99 points,
or 0.36 percent, at 8,049.37. The Standard & Poor's 500 Index
<.SPX> was up 3.20 points, or 0.38 percent, at 841.71. The
Nasdaq Composite Index <> was up 15.85 points, or 1.05
percent, at 1,532.15.
The FTSEurofirst 300 <> index of top European shares
rose 2.5 percent to close at 811.41 points, lifted by banks,
oil companies and miners.
Banks added most points to the index. Deutsche Bank
<DBKGn.DE> rose 3.1 percent on hopes that Germany's biggest
bank will be upbeat about 2009 prospects when it reports
fourth-quarter and full-year results on Thursday.
Banco Santander <SAN.MC> rose 2.2 percent ahead of its
results on Thursday.
While the economic data suggested to some that the
recession might not be as deep as first thought, it was still
too early to say there is light at the end of the tunnel.
"The bottoming out of the sentiment indicators seem to
suggest that the recession will not become worse... but being
optimistic is quite tricky," said Kornelius Purps, a
fixed-income strategist at UniCredit in Munich.
Losses in the U.S. Treasuries underscored weakness in
government debt this year, a dramatic turnaround from the
stampede into bonds at the height of the credit crunch.
The sell-off reflects some unwinding of safe-haven bonds
and other low-risk assets, in addition to anxiety about the
prospect for long-term inflation due to surging debt supply.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
11/32 in price to yield 2.93 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 1/32 in price to yield 0.98 percent.
EIA data showed total weekly crude stocks rose 7.2 million
barrels to 346.1 million barrels.
"The EIA stats came close to matching yesterday's API
numbers. As a result, bearish price response is currently being
muted despite an increase in total crude supply of more than 7
million barrels," said Jim Ritterbusch, President at
Ritterbusch & Associates.
U.S. light sweet crude oil <CLc1> rose 33 cents to $41.11 a
barrel.
Spot gold prices <XAU=> fell 85 cents to $900.75 an ounce.
Overnight in Asia, the MSCI index of Asia-Pacific stocks
outside Japan <.MIAPJ0000PUS> rose 0.9 percent, while Japan's
Nikkei average <> rose 2.7 percent.
(Reporting by Leah Schnurr, Richard Leong and Vivianne
Rodrigues in New York; Christopher Johnson, Ian Chua and Brian
Gorman in London; writing by Herbert Lash)
