* Durable goods data lifts stocks, Wall Street prospects
* Dollar falls back from 2008 highs
* Oil rises above $118 a barrel
(Updates throughout with moves after U.S. data)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 27 (Reuters) - Surprisingly robust U.S. durable
goods data lifted European stocks out of negative territory on
Wednesday and set up the prospect of a positive start on Wall
Street.
Oil prices climbed for the third day in a row, however, and
the dollar slipped back from recent highs.
New orders for long-lasting U.S. manufactured goods jumped a
surprising 1.3 percent in July on strong civilian aircraft
sales, while a gauge of business investment also rose
unexpectedly, the U.S. government reported.
This added some positive sentiment to stock markets weakened
for most of the day by earnings concerns, worries about banking
stress, Western tensions with Russia over Georgia and a gloomy
outlook for the world economy.
"(The data) bodes well for capital spending in the third
quarter. It doesn't seem like the credit crisis is impacting
capital spending, said Matthew Moore, economic strategist at
Banc of America in New York.
MSCI's main gauge of world stocks <.MIWD00000PUS> was higher
on the day but still trading around a two-year low.
It has lost more than 17 percent so far this year, on track
for one of its worst annual performances in more than 20 years.
European shares reversed course after the data after being
deep in the red. The FTSEurofirst index <> of pan-European
shares was flat having earlier been almost 1 percent lower on
the day.
Banking stocks were weighing. "Financials have been under
pressure due to concerns about the speed of the economic
slowdown and worries that there is still further fallout from
the subprime credit crunch issues," said Henk Potts, equity
strategist at Barclays Stockbrokers.
Societe Generale noted that troubles at U.S. mortgage
agencies Freddie Mac and Fannie Mae were a threat to U.S.
commercial banks, which it estimated hold some $1 trillion in
the agencies' debt, or 9 percent of the banks' balance sheets.
Earlier, Japan's Nikkei average <> dipped 0.2 percent,
led lower by exporters such as Honda <7267.T> and property
shares which dropped after the collapse of another builder.
Sohken Homes <8911.T> filed for protection from creditors
with 33.8 billion yen ($308 million) in debt, the latest in a
string of collapses in the property and construction sectors.
GUSTAV LIFTS OIL, DOLLAR SLIPS
Barclays' Potts said stock investors were still concerned
about the high price of oil and its effect on inflation and
sentiment despite the price of crude now being well off its
recent, all-time highs.
Oil rose for a third straight session, above $118 a barrel,
on worries that Tropical Storm Gustav will threaten oil and
natural gas installations in the Gulf of Mexico.
Crude for October delivery <CLc1> rose $1.82 to $118.09 a
barrel, after settling up $1.16 on Tuesday.
Gustav was downgraded to a tropical storm on Wednesday after
it slammed into Haiti on Tuesday, but forecasters expect wind
speeds to regain hurricane force, and it could be the first
major storm to threaten oil and gas production in the Gulf of
Mexico since 2005 [].
The euro and yields on euro zone government bonds rose to
session highs after Bloomberg quoted the European Central Bank
Governing Council Member Alex Weber as saying talk of a euro
zone interest rate cut is "premature".
"The market became too confident that rate cuts were on the
card," said a bond trader in London.
Weber, widely considered to be among the most 'hawkish' and
influential of ECB policymakers, said there is no scope for rate
cuts and hinted that there might even be room to raise them if
the economic outlook improved toward the end of the year.
The euro jumped on the headlines and was up 0.6 percent at
around $1.4737 <EUR=>.
The dollar index, a measure of the greenback's value against
six major currencies, fell 0.5 percent on the day to 76.87
<.DXY>, having hit a 2008 high on Tuesday at 77.619.
Euro zone government bond yields climbed after the Weber
comments promoted a sell off.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR>
was up 11 basis points at 4.092 percent, while the 10-year Bund
<EU10YT=RR> was up 6 basis points at 4.172 percent.
(editing by Mike Peacock)
