GLOBAL MARKETS-Stocks rally, oil up slightly

                                
 * Oil rises slightly but down from peaks on Libya fears
                                
 * US dollar trims gain vs euro, slips vs yen on GDP report
                                
 * US bonds pare losses after revised U.S. GDP data
 (Adds close of European markets)
                                
 By Herbert Lash
                                
 NEW YORK, Feb 25 (Reuters) - Equity markets rallied after a
week-long selloff, and crude oil prices edged higher on Friday
but were down from peaks earlier in the week on supply fears
sparked by the uprising in Libya.
                                
 Saudi Arabia raised production about 8 percent to above 9
million barrels per day to make up for a near halt in Libyan
exports, an industry source said, helping prices fall further
from peaks last seen in 2008. For details see:[ID:nLDE71O1KA]
                                
 "The tensions in the Middle East seem to be less at the
forefront of the market's mind. The initial panic seems to have
subsided a bit," said Phil Gillett, a trader at Spreadex.
                                
 The Saudi move bolstered news that U.S. consumer sentiment
rose to its highest level in three years in February, helping
offset a bearish report that showed the U.S. economy grew
slower than initially estimated in the fourth quarter.
[ID:nN25299682] [ID:nN25247775]
                                
 The U.S. dollar rebounded against the euro but gold prices
rose toward $1,410 an ounce and were on track for a fourth
straight week of gains, supported by safe-haven demand in light
of fears violence in Libya could spread in the region.
                                
 The euro <EUR=> was down 0.37 percent at $1.3752.
                                
 Consumer sentiment rose to 77.5, up from 74.2 in January,
and the highest since January 2008, according to the Thomson
Reuters/University of Michigan survey.
                                
 Gross domestic product was revised lower to an annualized
rate of 2.8 percent from an initial 3.2 percent estimate.
                                
 Events in North Africa and the Middle East still grabbed
the spotlight even as oil prices retreated from 2-1/2 year
peaks of almost $120 a barrel in London on Thursday to hover at
less than $112 on Saudi efforts to plug any supply gaps.
[ID:nLDE71N13Q]
                                
 "We have started producing over 9 million barrels per day.
We have a lot of production capacity," the industry source told
Reuters.
                                
 ICE Brent crude futures <LCOc1> in London were up 13 cents
at $111.49 after briefly trading negative on the day. U.S.
light sweet crude oil <CLc1> rose 26 cents to $97.52.
                                
 Stocks in Europe rose, with the FTSEurofirst 300 <.FTEU3>
index of top European shares closing up 1.2 percent.
                                
 World equities as measured by MSCI's  all-country world
index <.MIWD00000PUS> rose almost 0.8 percent.
                                
 "We got a little bit oversold in a very short period of
time this week so it's normal to get this kind of a rebound,"
said James Dailey, portfolio manager of TEAM Asset Strategy
Fund in Harrisburg, Pennsylvania.
                                
 "The market is likely to bounce a little more, but not too
much since there is still more to the downside after such a
strong rally and ongoing geopolitical concerns."
                                
 The Dow Jones industrial average <.DJI> was up 44.84
points, or 0.37 percent, at 12,113.34. The Standard & Poor's
500 Index <.SPX> was up 9.64 points, or 0.74 percent, at
1,315.74. The Nasdaq Composite Index <.IXIC> was up 32.84
points, or 1.20 percent, at 2,770.74.
                                
 U.S. Treasury debt prices rose as turmoil in North Africa
and worries over the economic impact of higher oil prices
maintained a safe-haven bid for government debt.
[ID:nN25406662]
                                
 The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
5/32 in price to yield 3.43 percent.
                                
 German bond prices fell as oil prices retreated and after
an Italian auction of 9.5 billion euros worth of debt attracted
decent demand.
                                
 The Bund future <FGBLc1> was last down 15 ticks down on the
day at 124.26.
                                
 Gold prices rose above $1,400 an ounce and were on track
for a fourth straight week of gains, supported by interest in
the metal as a haven from risk as violence flared in Libya.
[ID:nLDE71O0ST]
                                
 Government forces shot dead two protesters in the Libyan
capital Tripoli, Al Jazeera television reported, as a popular
uprising against Muammar Gaddafi closed in on his main power
base. [ID:nLDE71O00I]
                                
 Spot gold prices <XAU=> rose $4.55 to $1,404.30 an ounce.
 (Reporting by Angela Moon, Gertrude Chavez-Dreyfuss and Chris
Reese in New York; Ikuko Kurahone, Nia Williams, Emelia
Sithole-Matarise and Jan Harvey; Writing by Herbert Lash,
Editing by Kenneth Barry)