* U.S. stocks edge higher on positive signs in GDP data
* Crude oil rebounds as U.S. GDP data stokes optimism
* Bonds rise in safe-haven buying on consumer data
* Dollar drops broadly as strong Chicago PMI report weighs
(Updates with U.S. markets activity, changes byline, dateline;
previous LONDON)
By Herbert Lash
NEW YORK, July 31 (Reuters) - A slower-than-expected
shrinking of the U.S. economy lifted crude oil and U.S. stocks
on Friday but bonds rallied on data showing consumer spending
fell, bolstering the safe-haven appeal of government debt.
The euro extended gains versus the U.S. dollar, which fell
more than 1 percent against a basket of currencies, pressured
by month-end flows and after data showed that business activity
in the U.S. Midwest improved more than expected in July.
Oil rebounded on the business activity news, rising above
$68 a barrel, and gold futures in New York launched a brief
rally after the dollar gave up new ground.
The deepest U.S. recession since the Depression of the
1930s showed signs of easing during the second quarter, as
gross domestic product fell at a 1.0 percent annual rate but a
steep drop in consumption spending fanned fears of a sluggish
recovery. For story see [].
The report from the National Association of Purchasing
Management-Chicago offset some of the worries triggered by GDP
data that showed a renewed decline in consumer spending in the
second quarter. []
"Overall, sentiment for the buck is negative," said Jacob
Oubina, currency strategist at Forex.com in Bedminster, New
Jersey.
The GDP report was "backward-looking," he said. "The
Chicago PMI index actually came in better than expected, and
the details were pretty positive across the board."
U.S. stocks struggled to stay in positive territory given
the sharp drop in consumer spending, which accounts for more
than two-thirds of U.S. economic activity. It fell at a 1.2
percent rate in the second quarter. [])
"The worrisome factor is the consumer and what a big part
of our economy the consumer is, and we don't see any kind of
rebound there," said Alan Lancz, president of Alan B. Lancz &
Associates Inc, an investment advisory firm in Toledo, Ohio.
Shortly after 1 p.m. (1700 GMT), the Dow Jones industrial
average <> was up 15.27 points, or 0.17 percent, at
9,169.73. The Standard & Poor's 500 Index <.SPX> was up 0.85
points, or 0.09 percent, at 987.60. The Nasdaq Composite Index
<> was up 3.57 points, or 0.18 percent, at 1,987.87.
European stocks closed lower at the end of a strong month
for equities worldwide, with weakness in oils and pharmas
offsetting strength in banks and miners. []
The FTSEurofirst 300 <> index of top European shares
fell 0.2 percent to close at 928.78.
"There are some worries that the market may have gone too
far in the last three weeks. Markets have a habit of
underplaying or overplaying," said Howard Wheeldon, strategist
at BGC Partners.
But European equities rose for the third straight week, as
investors continued to view most earnings in the current season
positively. []
Government bonds rose. The benchmark 10-year U.S. Treasury
note <US10YT=RR> was up 24/32 in price to yield 3.52 percent.
The 2-year U.S. Treasury note <US2YT=RR> was up 3/32 in price
to yield 1.12 percent.
"Consumer demand was surprisingly weak so that lent a bid"
to Treasuries, said David Coard, head of fixed income sales and
trading at Williams Capital Group in New York.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 1.16 percent at 78.363.
The euro <EUR=> was up 1.24 percent at $1.4246. Against the
yen, the dollar <JPY=> was down 0.82 percent at 94.74.
U.S. light sweet crude oil <CLc1> rose $1.38 to $68.32 per
barrel.
Spot gold prices <XAU=> rose $17.85 to $951.15 an ounce.
Asian stocks were poised to set double-digit gains in July,
with the MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> up almost 12 percent for the month on bets the
region will lead the global economy out of recession.
The index rose 1.7 percent to an 11-month high while
Japan's Nikkei average <> rose 1.89 percent to a 10-month
peak.
(Reporting by Ellis Mnyandu, Matthew Robinson, Wanfeng Zhou
and Chris Reese in New York and Brian Gorman and Jon Hopkins in
London; Writing by Herbert Lash; Editing by James Dalgleish)
