(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
* U.S. stocks rise, led by tech, on strong economic data
* Trichet flags euro zone rate rise, spurring euro rebound
* Oil gains slightly; U.S. bonds slide on economic data
By Herbert Lash
NEW YORK, June 5 (Reuters) - U.S. stocks rallied and
government debt prices fell on Thursday as another batch of
data again pointed to a surprisingly strong U.S. economy.
But the dollar weakened against the euro after European
Central Bank President Jean-Claude Trichet signaled a possible
rise in interest rates later this year, sending crude oil
higher and flagging the risk of U.S. inflation. Rising euro
rates would make the European currency more attractive.
Euro zone government bond prices and interest rate futures
extended losses after Trichet's remarks, while U.S. government
debt prices fell after U.S. economic data fanned worries the
Federal Reserve would also raise rates.
Investors saw signs that the U.S, economy was averting
recession as the number of U.S. workers filing new claims for
jobless benefits fell unexpectedly last week to the lowest
level since mid-April and some of the biggest U.S. retailers
reported strong May sales. The government's tax rebate program
appeared to be spurring spending.
Crude prices rose above $124 a barrel Md gold came off lows
as the dollar slipped from a three-week high against the euro.
A weaker dollar makes dollar-denominated commodities more
attractive to investors, but that can fuel inflation.
Technology stocks in U.S. equity markets reacted strongly
to the Labor Department's unemployment report. Cisco Systems
<CSCO.O> rose 3 percent to $27.56 and Microsoft Corp <MSFT.O>
gained 2.3 percent to $28.18.
"The numbers have looked good economically and the retail
(sales) numbers were better than expected so a lot of worries
about the economy and recession are being lifted, giving
investors added confidence," said Alan Lancz, president of Alan
B. Lancz & Associates Inc. in Toledo, Ohio.
Before 1 p.m., the Dow Jones industrial average <> was
up 175.13 points, or 1.41 percent, at 12,565.61. The Standard &
Poor's 500 Index <.SPX> was up 19.53 points, or 1.42 percent,
at 1,396.73. The Nasdaq Composite Index <> was up 36.48
points, or 1.46 percent, at 2,539.62.
European stocks ended lower for a second day in a row after
Trichet left the door open to an interest rate hike as early as
July.
Banks were mixed. Credit Agricole <CAGR.PA> fell 8 percent
to a five-year low after France's biggest retail bank unveiled
a much lower-than-expected price for the shares offered in its
5.9 billion euro rights issue.
Royal Bank of Scotland <RBS.L> rose 3.8 percent, boosted by
a Citigroup rating upgrade to "buy."
The FTSEurofirst 300 <> index of top European shares
unofficially ended 0.2 percent lower at 1,309.51 points.
"We still don't have much visibility and fears over the
health of banks continue to resurface here and there," said
Bruno Cavalier, economist at Oddo Securities in Paris.
"But market sentiment has improved quite a lot over the
past two months. We thought we were going to hell at that time.
Now it looks more like the purgatory, but we're still far away
from paradise," he said.
European interest rates futures jumped so much they
reflected the potential for two ECB rate increases this year.
Two-year yields <EU2YT=RR> hit 4.501 percent, their highest
level since late July, and 2-year swap rates <EURAB6E2Y=> hit
new 7-1/2 year highs of 5.191 percent.
The U.S. jobless data pared safe-haven bids for U.S.
bonds.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 14/32 to yield 4.0364 percent. The 30-year U.S. Treasury
bond <US30YT=RR> fell 20/32 to yield at 4.7384 percent.
The data "support our belief that the economy is much
better than many give it credit for," said Kim Rupert, managing
director of global fixed income analysis with Action Economics
LLC in San Francisco.
Trichet's comments strengthened the euro. Against the yen,
the euro surged 1.5 percent to 164.91 <EURJPY=>, its largest
daily rise in about two and a half months.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.38 percent at 73.194. Against the
yen, the dollar <JPY=> rose 0.65 percent at 105.95.
U.S. light sweet crude oil <CLc1> was up $1.65 to $123.95.
Shares in Asia fell, with stocks in Malaysia <>
posting their biggest single-day decline in 12 weeks after the
government lifted oil subsidies.
Japan's Nikkei share average <> finished down 0.65
percent and the MSCI index of Asia-Pacific stocks outside Japan
fell 0.6 percent <.MIAPJ0000PUS>.
(Reporting by Gertrude Chavez-Dreyfuss, Walker Simon and
Richard Leong in New York, Alex Lawler and Jan Harvey in London
and Blaise Robinson in Paris)
(Reporting by Herbert Lash. Editing by Richard Satran)
