(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
* Stocks rise on benign U.S. inflation reading for April
* Oil falls from recent record highs as crude stocks rise
* Yen falls as U.S. consumer price data boost risk demand
By Herbert Lash
NEW YORK, May 14 (Reuters) - U.S. and European stocks rose
on Wednesday as a tame U.S. consumer inflation report eased
worries that the Federal Reserve might have to raise interest
rates to curb inflation, raising investors' appetite for risk.
The smaller-than-expected 0.2 percent increase in U.S.
consumer prices in April soothed concerns about surging
inflation and drove up the price of longer-maturity U.S.
government debt, which is sensitive to inflation expectations
that erode bond values over time.
The yen fell broadly as the Consumer Price Index report
raised risk appetites and was seen giving the Federal Reserve
flexibility to deal with the downturn in the United States,
world's biggest economy.
Crude oil prices eased off this week's record highs.
The prospect of steady to lower borrowing costs lifted
shares of U.S. financial companies, home builders and
retailers.
"The big news is that the CPI, both overall and core, were
better than expected," said Al Goldman, chief market strategist
at Wachovia Securities in St. Louis. "That dispelled a lot of
concern by people who were afraid that inflation was going to
run wild and the Fed would have to jack up interest rates."
After midday, the Dow Jones industrial average <> was
up 110.00 points, or 0.86 percent, at 12,942.18. The Standard &
Poor's 500 Index <.SPX> was up 11.60 points, or 0.83 percent,
at 1,414.64. The Nasdaq Composite Index <> was up 21.98
points, or 0.88 percent, at 2,517.10.
Stronger-than-expected results from department store
operator Macy's Inc <M.N> and a smaller than-expected loss from
home finance company Freddie Mac <FRE.N>, a barometer for the
U.S. housing crisis, also buoyed sentiment.
The pullback in oil prices also helped shares of big
manufacturers such as 3M Co <MMM.N>, whose stock was among the
Dow's top advancers. 3M shares rose 1.3 percent to $78.20.
Advancers beat decliners by almost three-to-one on the New
York Stock Exchange.
European shares ended higher as the tame U.S. CPI report
eased worries that the Fed might have to raise rates and strong
earnings reports raised investor optimism.
Airbus parent EADS <EAD.PA> rose 5.9 percent after it
posted quarterly profits that were stronger than expected and
stuck to its forecast for the year despite fresh delays to its
A380 superjumbo jet.
BNP Paribas <BNPP.PA>, France's biggest listed bank, gained
5 percent after it posted results that beat most analysts'
expectations.
Dutch financial services group ING Groep <ING.AS> rose 3.9
percent after reporting first-quarter results with production
above analysts' forecasts.
The FTSEurofirst 300 <> index of top European shares
ended 0.6 percent higher at 1,354.70 points, its highest close
in nearly a week.
BHP Billiton <BHP.AX><BLT.L>, the world's biggest mining
company, rose 4.9 percent, fueled by speculation that a
state-controlled Chinese firm was building a stake. Much of the
speculation centered on giant Chinese aluminum maker Chinalco,
already the largest shareholder in mining group Rio Tinto
<RIO.L>.
Oil rose from session lows after crude oil stocks climbed
less than expected in the United States, the world's top
consumer.
The latest weekly U.S. fuel inventory data was mixed, with
a rise in crude oil and distillate stocks but a surprise fall
in gasoline.
U.S. light crude for June delivery <CLc1> fell 59 cents at
$125.21. It has hit a string of record highs over the past week
and reached a peak of $126.98 a barrel on Tuesday.
London Brent crude <LCOc1> declined $1.40 at $122.70 a
barrel.
U.S. Treasury debt prices were mixed. Longer-dated bonds
rose on the modest inflation reading, while the increased
appetite for riskier assets such as corporate bonds and U.S.
stocks pulled shorter maturity prices slightly lower.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
1/32 to yield 3.91 percent. The 2-year U.S. Treasury note
<US2YT=RR> fell 2/32 to yield 2.50 percent. The 30-year U.S.
Treasury bond <US30YT=RR> rose 11/32 to yield 4.61 percent.
The dollar was break-even against major currencies, with
the U.S. Dollar Index <.DXY> little changed at 73.299.
The euro <EUR=> rose 0.14 percent at $1.548, and against
the yen, the dollar <JPY=> rose 0.36 percent at 105.16.
Spot gold prices <XAU=> rose $1.95, or 0.23 percent, to
$867.75.
Asian stocks staged a late surge on Wednesday to take the
Tokyo and Sydney markets to four-month closing highs.
The Nikkei average <> rose 1.2 percent for its highest
close since January, while other Asian stocks <.MIAPJ0000PUS>
were steady.
Sydney's S&P/ASX 200 index <> rose 1 percent to a
four-month closing high as resources firms, led by BHP, enjoyed
high oil and metals prices.
(Reporting by Ellis Mnyandu, John Parry and Lucia Mutikani in
New York, Jane Merriman and Lewa Pardomuan in London and Blaise
Robinson in Paris; Editing by Leslie Adler)
