* U.S. stocks rise as financials rebound after 2-day fall
* Oil falls as European contraction stokes demand worries
* Euro falls to below $1.48, lowest level since February
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 14 (Reuters) - The U.S. dollar and global
stocks moved higher on Thursday, spurred by a rebound in
financial shares after a sharp two-day sell-off and optimism
that declining commodity prices will ease inflation pressures.
Oil fell to $115 a barrel as economic weakness in Europe
underscored the threat to global demand for crude, and on hopes
a shaky cease-fire between Russia and Georgia would hold.
Rising oil prices earlier in the day helped energy and
mining shares in Europe. But sliding oil prices later gave Wall
Street optimism that the recent drop in the price of key
commodities will ease inflation strains in the long run.
"Crude oil's pulling back has taken the pressure out of
the inflation picture. This translates to a natural rebound in
equities," said Craig Peckham, equity trading strategist at
Jefferies & Co in New York.
Financial shares jumped after an 8 percent slide the past
two sessions in the U.S. sector, partially on the view that the
latest U.S. government data showed inflation pressures may have
peaked so the Federal Reserve will keep interest rates steady.
U.S. and European data suggested policy-makers have more
scope to leave respective benchmark interest rates unchanged or
even lower them. That would help banks reverse some of their
recent losses.
In Europe, UBS <UBSN.VX> rose 3.6 percent, Standard
Chartered <STAN.L> gained 3.7 percent and BNP Paribas <BNPP.PA>
gained 1.2 percent.
In the United States, shares of Bank of America Corp
<BAC.N> were the top boost to the S&P 500, with a gain of 4.57
percent. Wells Fargo <WFC.N> and JPMorgan Chase <JPM.N also
drove the index higher, rising 3 percent and 2.44 percent,
respectively.
The Dow Jones industrial average <> rose 82.97 points,
or 0.72 percent, at 11,615.93. The Standard & Poor's 500 Index
<.SPX> added 7.10 points, or 0.55 percent, at 1,292.93. The
Nasdaq Composite Index <> gained 25.05 points, or 1.03
percent, at 2,453.67.
Oil and gas shares were the top performing sector on the
European market as oil futures held firm, before crude prices
tumbled later in the day. Energy shares were the big losers in
the United States.
Norway's StatoilHydro <STL.OL> gained 2.7 percent, while
heavyweights Royal Dutch Shell <RDSa.AS> added 1.9 percent and
BP <BP.L> 0.5 percent.
The FTSEurofirst 300 index <> of top European shares
ended up 0.5 percent at 1,185.64 points.
The dollar rose versus the euro as currency traders saw
signs of higher U.S. inflation as a strength while reports of a
contraction in the euro zone's economy as a weakness.
The euro <EUR=> fell below $1.48 to its lowest level since
February as crude oil prices declined further. It is now more
than 10 cents below a record high of $1.6038 struck in July.
"It's mainly a reaction to a pullback in oil prices," said
Vassili Serebriakov, a currency strategist at Wells Fargo in
New York.
"Some of the moves are exaggerated because of thin
liquidity. But this is still part of the ongoing adjustment in
the unwinding of short dollar positions," Serebriakov said.
the benchmark 10-year U.S. Treasury note <US10YT=RR> rose
10/32 to yield 3.90 percent. The 30-year U.S. Treasury bond
<US30YT=RR> gained 22/32 to yield 4.53 percent.
The euro <EUR=> fell 0.79 percent at $1.4806, earlier
touching $1.4779.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.55 percent at 76.674. Against the yen,
the dollar <JPY=> rose 0.15 percent at 109.63.
U.S. crude oil future <CLc1> for September settled down 99
cents at $115.01 a barrel after falling as low as $112.59 in a
volatile trading session. September London Brent futures
<LCOc1> expired down 83 cents at $112.69 a barrel.
"We've corrected quite a bit on oil. Despite a lot of
bullish news, the sentiment has been bearish," Harry
Tchiliguirian, senior oil analyst at BNP Paribas, said.
Gold futures ended 2 percent lower in a wide trading range,
holding just above $810 an ounce as a dollar rally, oil losses
and chart-based weakness prompted a bout of long liquidation.
The December gold contract <GCZ8> settled down $17.00 at
$814.50 in New York.
U.S. consumer prices rose at twice the rate expected in
July. CPI, a key gauge on inflation, rose 0.8 percent in the
month after a 1.1 percent jump in June. That was far above the
0.4 percent gain forecast by economists polled by Reuters.
Higher consumer prices initially would boost the case for
U.S. rate hikes -- and boost the return on dollar-denominated
assets. But over time it would hurt the U.S. economy.
A bigger-than-expected 0.3 percent rise in core U.S. CPI,
which strips out volatile food and energy prices, startled bond
traders enough to provoke a brief flurry of selling.
But the selling was short-lived on the belief weaker global
growth and a recent pullback in oil prices will help subdue
inflation in coming months. Also, Treasuries gave up ground on
Wednesday when a rally in oil prices revived inflation fears.
Worries about Japan's economy pushed the Nikkei share
average <> down 0.5 percent. The MSCI Asia-Pacific
ex-Japan index <.MIAPJ0000PUS> edged up 0.1 percent, after
falling to a 17-month low on Wednesday.
(Reporting by Robert Campbell, Wanfeng Zhou, Richard Leong,
Kristina Cooke and Frank Tang in New York and Amanda Cooper and
Golnar Motevalli in London)
(Writing by Herbert Lash. Editing by Richard Satran)
