GLOBAL MARKETS-Dollar, stocks gain on economy; oil falls

                                
 * Stocks surge on big revision to second-quarter U.S. GDP
                                
 * Oil prices slip on supply plan if Gustav slams U.S. Gulf
                                
 * Dollar up on GDP data, ECB rhetoric still impacts euro
                                
 * Surprise gain in U.S. GDP upends U.S., euro zone debt
 (Adds close of U.S. markets)
                                
 By Herbert Lash
                                
 NEW YORK, Aug 28 (Reuters) - The dollar gained and U.S.
stocks rallied more than 1 percent on Thursday on news of solid
U.S. economic growth and a drop in oil prices despite the
threat that powerful storm Gustav poses for the Gulf's energy
infrastructure.
                                
 U.S. and European equity investors were cheered by a robust
revision of second-quarter U.S. gross domestic product to 3.3
percent, up from an initial read of 1.9 percent, which had cast
doubt on whether the United States was in or near recession.
                                
 Euro zone and U.S. government debt prices fell on the new
number -- analysts had expected a 2.7 percent growth rate --
and stocks jumped as it fanned optimism in equity markets.
                                
 The improved economic outlook, together with the slide in
oil prices, spurred investors to scoop up financial and retail
stocks and jump into industrial shares such as Caterpillar
<CAT.N>, often cited as a bellwether for the U.S. economy.
                                
 Consumer spending and net exports were more robust than
initially estimated, and inventories fell less sharply in the
GDP report, the U.S. Commerce Department said.
                                
 "Today's data on GDP was encouraging, and that is what
investors really want to see: a tick up in the economy," said
Bruce Zaro, chief technical strategist at Delta Global Advisors
in Boston.
                                
 A separate government report showed the number of U.S.
workers filing new claims for jobless benefits fell to a level
that was a touch lower-than-expected.
                                
 Lower oil prices also supported equities. Earlier, oil rose
above $120 a barrel, boosted by the threat Tropical Storm
Gustav poses to U.S. oil installations in the Gulf of Mexico.
                                
 "You hate to be underweight in stocks when you have an
economy that is performing better-than-expected," said James
Paulsen, chief investment officer at Wells Capital Management
in Minneapolis.
                                
 The Dow Jones industrial average <.DJI> closed up 212.67
points, or 1.85 percent, at 11,715.18. The Standard & Poor's
500 Index <.SPX> gained 18.99 points, or 1.48 percent, at
1,300.65. The Nasdaq Composite Index <.IXIC> rose 29.18 points,
or 1.22 percent, at 2,411.64.
                                
 European stocks closed sharply higher after crude prices
slipped and the revised U.S. GDP number drew investors back
into the market.
                                
 Banking was the biggest sector to gain on the pan-European
FTSEurofirst 300 <.FTEU3> index, which ended 1.5 percent higher
at 1,190.91 points. The benchmark is off 21 percent this year.
                                
 French bank Credit Agricole <CAGR.PA> was one of the top
gainers, jumping 8.9 percent despite posting a 94 percent fall
in quarterly profit.
                                
 Other banks also advanced, with Barclays <BARC.L> rising
5.8 percent, UBS AG <UBSN.VX> rising 4.6 percent, HBOS <HBOS.L>
jumping 4.2 percent and Royal Bank of Scotland <RBS.L>
advancing 3.7 percent.
                                
 Although the euro surrendered gains against the dollar, it
remained off a six-month low from earlier this week on lowered
expectations the European Central Bank will cut rates.
                                
 The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.14 percent at 77.128. Against the yen,
the dollar <JPY=> was off 0.03 percent at 109.51.
                                
 The euro <EUR=> fell 0.10 percent at $1.4705.
                                
 Both U.S. and euro zone government debt fell. Dampened
expectations of a ECB rate cut and the solid revision to U.S.
economic growth wiped out initial euro zone debt gains.
                                
 The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
6/32 to yield at 3.79 percent. The 30-year U.S. Treasury
bond<US30YT=RR> shed 1/32 to yield 4.39 percent.
                                
 Oil prices fell more than $2 after the U.S. government and
the International Energy Agency pledged to release emergency
stockpiles if Gustav disrupts U.S. oil production in the Gulf.
                                
 U.S. crude <CLc1> settled down $2.56 to $115.59 barrel,
after falling as low as $114.08 earlier. London Brent crude
<LCOc1> traded down $2.05 to settle at $114.17 a barrel.
                                
 Gustav was forecast to strengthen into a hurricane as it
neared the Gulf of Mexico, home to one-quarter of U.S. crude
oil production and 15 percent of its natural gas output.
                                
 Hurricanes have become a key focus in the oil market since
Katrina and Rita in 2005 temporarily knocked out one-quarter of
U.S. oil and refined fuel production, sending prices to
then-record highs.
                                
 Asian stocks were little changed, but commodity-related
shares received a boost from rising metals prices and also from
crude prices,
                                
 Japan's Nikkei share average <.N225> was largely unchanged,
and outside Japan, stocks in the Asia-Pacific region
<.MIAPJ0000PUS> fell 0.41 percent.
 (Reporting by Matthew Robinson, Steven C. Johnson, Nick
Olivari, Chris Reese and Frank Tang in New York and Atul
Prakash in London)
 (Writing by Herbert Lash)