* HP lifts U.S. equity market, Europe rises on commodities
* Dollar rises on global growth concerns; euro, yen fall
* Oil renews slide after big rise in U.S. weekly inventory
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Aug 20 (Reuters) - Oil prices slid on Wednesday
after the biggest weekly increase in U.S. crude stocks in seven
years, while a deteriorating economic outlook in countries
outside the United States helped the dollar resume a march
toward 2008 peaks.
U.S. government debt prices rallied in a safe-haven bid
driven by worries about American mortgage finance giants Fannie
Mae <FNM.N> and Freddie Mac <FRE.N>, but global stocks
initially shrugged off those concerns to move higher.
A 9.4 million barrel increase in U.S. crude inventories
sparked an oil sell-off, even as analysts said the build likely
resulted from a rebound in imports after foul weather the
previous week delayed shipments along the Gulf Coast.
Crude's slide reversed earlier gains that had been
triggered by a forecast from investment bank Goldman Sachs that
oil prices would hit $149 by the end of the year.
Shares of Fannie and Freddie fell to their lowest levels in
more than 18 years after The Wall Street Journal said Freddie
executives were due to meet Treasury officials on Wednesday,
perhaps to see how the government will support the company.
Investors fear a collapse of Fannie and Freddie could add
to risks of an already battered financial system, potentially
exacerbating the U.S. housing slump and global credit crisis.
"You are seeing continued flight-to-quality (buying of
bonds) over concern with what is happening to Fannie and
Freddie," said Mary Ann Hurley, vice president of fixed income
trading at D.A. Davidson & Co in Seattle.
Bond market gains were capped by rising stock markets,
where investors snapped up shares of technology companies after
Hewlett-Packard <HPQ.N> reported a strong profit and outlook.
HP shares were the biggest boost to the Dow and the S&P
500, rising almost 5 percent to $45.80, a day after the world's
largest computer maker reported net profit rose 14 percent and
forecast fourth-quarter earnings ahead of expectations.
The HP news boosted hopes that technology spending will
hold up, particularly as demand from abroad offsets weakness in
the United States.
Before 1 p.m., the Dow Jones industrial average <> was
up 68.39 points, or 0.60 percent, at 11,416.94. The Standard &
Poor's 500 Index <.SPX> was up 6.81 points, or 0.54 percent, at
1,273.50. The Nasdaq Composite Index <> was up 17.50
points, or 0.73 percent, at 2,401.86.
European stocks added to gains in late trading, propelled
by a rally in heavyweight energy and mining stocks. Recently
battered banking shares also trimmed losses.
Miners Rio Tinto <RIO.L> rose 7.4 percent, and BHP Billiton
<BLT.L> and Kazakhmys <KAZ.L> each gained 6.7 percent.
Heavyweight oil shares BP <BP.L>, Total <TOTF.PA> and Shell
<RDSa.L> also gained, as oil traded higher for much of the
European session, though crude closed lower at the end.
The pan-European FTSEurofirst 300 <> index ended up
0.5 percent at 1,165.31 points, with commodities the top four
percentage gainers on the benchmark.
The dollar index <.DXY> firmed after retreating much of the
New York session on Tuesday, as investors took profits
following a 2008 high hit earlier that day on global markets.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> down 0.49 percent at 77.128. Against the
yen, the dollar <JPY=> was down 0.30 percent at 110.02.
The euro <EUR=> rose 0.62 percent at $1.4696.
Traders resumed buying the dollar with some saying the
rise was more a result of short-term position adjustment than
anything else after nearly two weeks of unbroken gains.
"We're seeing this slightly bid tone in the U.S. dollar,
but there's no real direction in the market. It's just
uninspiring," said C.J. Gavsie, managing director for foreign
exchange sales at BMO Capital Markets in Toronto.
"Nothing has changed fundamentally" and the same concerns
about Europe and other economies over the past month continue
to undermine non-U.S. dollar currencies, Gavsie added.
Longer-dated euro zone government bonds rebounded with the
10-year futures briefly hitting a fresh 3-month high in another
thinly traded session that analysts said exaggerated moves.
But with no major euro zone or U.S. economic data, and
little impetus from steadier European and U.S. equities,
technical factors were once again the dominant driver.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
7/32 to yield 3.81 percent. The 30-year U.S. Treasury
bond<US30YT=RR> rose 9/32 to yield 4.46 percent.
Oil slipped. U.S. light sweet crude oil <CLc1> fell 79
cents to $113.74 per barrel.
Spot gold prices <XAU=> rose $3.20 to $801.55 an ounce.
Most Asian stock markets edged higher, rebounding from a
two-year low, as cheap valuations proved irresistable and
market chatter increased about fiscal stimulus in China.
The Asia-Pacific ex-Japan index <.MIAPJ00000PUS> rose 1.25
percent, but Japan's Nikkei share average <> fell 0.1
percent in a choppy sesssion dragged lower by exporters.
(Reporting by Ellis Mnyandu, Chris Reese, John Parry, Gertrude
Chavez-Dreyfuss, Frank Tang in New York and Ian Chua, Sitaraman
Shankar, Ikuko Kao and Alex Lawler in London)
(Writing by Herbert Lash. Editing by Richard Satran)
