* Stocks gain on hopes global recession near a bottom
* Euro gains versus dollar as optimism overshadows gloom
* Oil rises above $58 a barrel on hope recovery is near
* Government debt rises on U.S. jobs data, economy worries
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, May 14 (Reuters) - U.S. and European stocks rose
and credit spreads tightened further on Thursday as hopes that
a deep global recession may have bottomed gained the upper
hand.
The U.S. dollar rose against the safe-haven yen amid a
modest rise in risk appetite as investors shrugged off the
latest signs of worldwide economic weakness.
U.S. crude oil prices rose back above $58 a barrel,
tracking the rebound on Wall Street, although a gloomy forecast
about world energy demand by the International Energy Agency
limited gains.
Investors remain caught between two camps: those
anticipating economic recovery and those still worried about
recession.
U.S. and euro zone government bonds rose as the weak U.S.
jobs data underscored the long road to recovery from the worst
global economic slump since World War Two. Gold prices also
rose, helped by demand for protection against potential
inflation.
"Investors were not afraid to miss the first 10 percent of
the market move up because they were more worried about the
market moving lower," said Dick Del Bello, senior partner at
Conifer Securities in New York.
"But there's an enormous amount of cash sitting on the
sidelines, and that's not doing anybody any good. Managers
today feel they have to participate."
Stock market gains capped some of the bond rally as equity
investors saw the unexpected jump in weekly initial U.S.
jobless claims as largely caused by the beleaguered auto
sector, in the wake of Chrysler's bankruptcy.
The stock rally was spurred by investors pushing updefensive stocks, such as consumer staples and healthcare.
Shares of Coca-Cola Co <KO.N> rose 2.9 percent and drugmaker
Merck <MRK.N> gained 1.5 percent.
Bank shares also rose, with Wells Fargo & Co gaining 6.2
percent and JPMorgan <JPM.N> shares adding 3.6 percent. The KBW
bank index <.BKX> shot up 3.7 percent.
The Dow Jones industrial average <> rose 46.43 points,
or 0.56 percent, at 8,331.32. The Standard & Poor's 500 Index
<.SPX> added 9.15 points, or 1.04 percent, at 893.07. The
Nasdaq Composite Index <> gained 25.02 points, or 1.50
percent, at 1,689.21.
European shares edged higher, snapping a three-day losing
run, as gains for several heavyweight banks more than offset a
drop in energy stocks on the weaker crude prices.
The pan-European FTSEurofirst 300 <> index rose 0.5
percent to close at 835.71 points. The index is up 29 percent
from the lifetime low it hit on March 9.
U.S. crude for June delivery <CLc1> rose 60 cents to settle
at $58.62 a barrel, after initially hitting $60 a barrel, a six
month high, earlier this week.
Oil prices have been tracking equities markets in recent
months as traders look to stocks for signs of an economic
recovery that could lift ailing world fuel demand.
Paris-based IEA, adviser to 28 industrialized nations on
energy policy, said oil's rise to $60 this week was due to
sentiment rather than demand. Consumption is set to fall by
2.56 million barrels a day in 2009, it said.
"The oil price seems to have moved a bit higher in the past
month largely on the basis of equity markets and sentiment
about potential economic recovery," David Fyfe, head of the
IEA's oil, industry and markets division, told Reuters.
"But we're not seeing it in terms of the preliminary demand
data for early 2009," Fyfe said.
Copper prices tumbled to two-week lows on concerns about
Chinese demand and concerns about the economy. []
The worst economic figures in half a century from Spain,
the euro zone's fourth biggest economy, reinforced expectations
the 16-nation euro bloc will report a deepening recession in
the first quarter in data to be published Friday.
Spanish gross domestic product shrank 1.8 percent
quarter-on-quarter after a 1.0 percent contraction in the final
three months of 2008.
The European Union's top economic official said the economy
is showing the first positive signs amid its biggest crisis
since the grouping's foundation 50 years ago, but it is not yet
in recovery. []
The June Bund future <FGBLc1> rose 37 ticks at 121.69,
after earlier reaching its highest level in a week at 121.94.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
2/32 in price to yield 3.10 percent. The two-year U.S. Treasury
note <US2YT=RR> added 1/32 in price to yield 0.86 percent.
Inter-bank U.S. dollar funding costs marked a fresh low,
extending their decline and credit spreads compressed further
as the interbank money market continued its steady recovery.
Hopes that the global recession may be touching bottom and
first-quarter bank results that were not as bad as expected
have soothed a sector severely hit by the credit crisis.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.29 percent at 82.329.
The euro <EUR=> was up 0.32 percent at $1.3641, and against
the yen, the dollar <JPY=> was up 0.37 percent at 95.75.
U.S. gold futures for June delivery <GCM9> settled up $2.50
at $928.40 an ounce in New York.
(Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss,
Burton Frierson in New York; Brian Gorman, Ian Chua, Kirsten
Donovan and David Sheppard in London; writing by Herbert Lash;
Editing by Leslie Adler)
