* European, U.S. stocks rise on Lehman investment hopes
* Oil slips as U.S. dollar recovers; but market is divided
* Bonds fall on stock market gains, loss of save-haven bid
* Dollar slips as rate hike prospects, inflation fears ebb
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Aug 22 (Reuters) - U.S. and European stocks rose
on Friday as credit crisis fears eased on hopes U.S. investment
bank Lehman Brothers will attract a major investor, and oil
prices fell, pressured by a bounce-back in the U.S. dollar.
U.S. and euro zone government debt prices slipped as easing
oil prices curbed inflation concerns, as did remarks by Federal
Reserve Chairman Ben Bernanke, who suggested U.S. interest
rates would stay on hold, cutting the safe-haven appeal of
bonds. The dollar drifted back from its highs on Bernanke's
comments because some currency traders have been anticipating
U.S. yields will outpace other currencies' rates.
The euro was on track for its best weekly gain versus the
dollar since mid-July, despite Friday's losses.
Bernanke, speaking at a Fed symposium in Jackson Hole,
Wyoming, said a stable currency and a decline in commodity
prices should help slow inflation this year and next.
Investors were generally more positive on the outlook for
the economy and financial companies in particular, and turned
to the higher risk of equities and away from lower-risk
investments like Treasuries and euro zone debt.
"It's all about stocks," said Dominic Konstam, head of
interest rate strategy at Credit Suisse in New York.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
15/32 to yield 3.89 percent. The 30-year U.S. Treasury bond
<US30YT=RR> shed 13/32 to yield 4.49 percent.
Stocks were bolstered by Bernanke's comments, some soothing
remarks from influential U.S. investor Warren Buffett and news
of a potential purchase of a stake in Lehman <LEH.N>.
Lehman shares jumped more than 12 percent after the Korea
Development Bank [] said the bank was an acquisition
option. Lehman is among U.S. banks that have been battered by
mounting losses stemming from the U.S. housing slump.
"The news about Lehman today added a bit of reassurance
that there's still value in some of the financial companies,"
said Cleveland Rueckert, market analyst at Birinyi Associates,
in Stamford, Connecticut. "It's a trader's market right now.
You've got financials up and energy down."
Before 1 p.m., the Dow Jones industrial average <> was
up 136.46 points, or 1.19 percent, at 11,566.67. The Standard &
Poor's 500 Index <.SPX> was up 7.54 points, or 0.59 percent, at
1,285.26. The Nasdaq Composite Index <> was up 18.95
points, or 0.80 percent, at 2,399.33.
European shares ended sharply higher, lifted by a rebound
in financial stocks on the prospect Lehman might be bought and
easing oil prices.
Buffett boosted equities by saying that stocks looked more
attractive now than they did a year ago.
"Let's hope he is right. Most of us think he is. The bulls
would agree on his comments about valuations," said Mike
Lenhoff, chief strategist at wealth managers Brewin Dolphin.
The pan-European FTSEurofirst 300 index <> ended up
1.8 percent at 1,175.79, but was off 1.2 percent on the week.
The DJ Stoxx banking index <.SX7P> rose 3 percent after
falling 6.3 percent in the past five sessions.
HSBC <HSBA.L> rose 2.6 percent, Royal Bank of Scotland
<RBS.L> gained 5.4 percent and Barclays <BARC.L> rose 5.1
percent.
Oil lost traction as the dollar fought back from the
previous day's sharp correction versus major currencies.
Thursday's rally left crude analysts divided, with some
calling a temporary spurt, while others, notably those at
long-time oil bull Goldman Sachs, saying market fundamentals
point to firm prices.
"The market had got itself into a very bearish frame of
mind and I think a lot of people were very short," said RBS
Sempra economist John Kemp. "Once prices began rising you saw a
sort of self sustaining rally to allow them to cover their
positions."
U.S. light sweet crude oil <CLc1> fell $3.12 to $118.06 a
barrel.
U.S. gold futures dropped 1 percent, retreating from a
one-week high set in the previous session as a strong dollar
prompted investors to sell commodities across the board.
Spot gold prices <XAU=> fell $8.75 to $826.70 an ounce.
The dollar also gained on comments by Buffett, who said in
an interview that he has no bets against the dollar, which
further bolstered sentiment on the U.S. currency.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.77 percent at 76.628. Against the yen,
the dollar <JPY=> was up 1.40 percent at 109.87.
The euro <EUR=> rose 0.62 percent at $1.4813.
Asian stocks fell overnight to a two-year low, down for a
fourth straight week, after oil's surge on Thursday sparked
inflation worries and the financial crisis simmered unabated.
Japan's Nikkei share average <> fell 0.7 percent to
12,666.04, and MSCI's pan-Asia stocks index <.MIAS00000PUS>
fell 0.8 percent, touching a two-year low. The Asia-Pacific
ex-Japan index <.MIAPJ0000PUS> slipped 0.03 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, John
Parry and Frank Tang in New York and Jeremy Gaunt, Kirsten
Donovan, Bate Felix)
(Reporting by Herbert Lash. Editing by Richard Satran)
