(Recasts with U.S. markets, changes dateline; previous
LONDON)
* Oil prices jump then fall sharply on U.S. inventory data
* U.S., European stocks rise, pulled by opposing sectors
* Bonds fall in global sell-off sparked by inflation fear
By Herbert Lash
NEW YORK, May 29 (Reuters) - U.S. and European stocks rose
on Thursday, as a steep drop in oil prices boosted equities but
failed to slow the week's global bond market decline linked to
lingering fears of inflation.
Oil prices fell after traders shrugged off weekly U.S.
inventory data showing a surprisingly large drawdown in crude
supply. The news initially sent prices more than $2 higher.
The dollar briefly pared gains as crude moved higher,
renewing concerns about the impact of high energy costs on
already sluggish U.S. growth.
Boosting positive sentiment on U.S. equity markets was an
upward revision in the government's estimate of first-quarter
gross domestic product in the United States.
Financial shares, which have suffered the harshest setbacks
this year, outperformed all other sectors in U.S. markets,
rising 1.7 percent, according to the S&P financial index
.<GSPF>.
The fall in oil prices fueled broad-based gains in all
sectors except materials and energy stocks.
JPMorgan Chase <JPM.N> was one of the Dow's biggest
gainers, rising 1.9 percent to $43.69. A bank spokesman said
its $1.5 billion deal to acquire Bear Stearns Cos Inc <BSC.N>
would be completed on Friday, well ahead of earlier forecasts.
The Dow Jones industrial average <> rose 114.72 points,
or 0.91 percent, at 12,708.75. The Standard & Poor's 500 Index
<.SPX> gained 12.71 points, or 0.91 percent, at 1,403.55. The
Nasdaq Composite Index <> added 30.29 points, or 1.22
percent, at 2,516.99.
While European rose, the leaders and decliners
were an exact opposite of U.S. equity markets. Energy shares
rose in Europe, and the banking sector declined amid fresh
worries.
German utility E.ON <EONG.DE> was the largest upward
influence on the broader market, rising 2.8 percent , while oil
majors BP <BP.L> and Total <TOTF.PA> were closely behind,
rising 1.2 percent and 1.5 percent, respectively.
The FTSEurofirst 300 index <> of top European shares
rose 0.3 percent to close at 1,330.28 points.
A preference among investors for the largest market cap
companies continued to dominate trading.
"It's the big companies that are going up and that is
pulling the market up, but the broader tenor is still
cautious," said Andrew Lynch, a portfolio manager at
Schroders.
Banks were once again the biggest drag on the European
index, led largely by Royal Bank of Scotland <RBS.L>.
RBS fell by as much as 6.1 percent to an eight-year low on
concern that its planned rights issue may encounter problems.
RBS, which declined to comment, closed down 2.6 percent.
Crude prices fell more than $3 after traders disregarded
weekly data showing a surprisingly large drawdown in U.S. oil
supply.
"Once again, on further review, we should not read too much
into one week's report from the EIA," said Phil Flynn, analyst
at Alaron Trading in Chicago, citing the Energy Information
Administration's reason for the drawdown.
Bonds prices fell on the report that showed faster U.S.
growth in the first quarter as demand for foreign goods fell
and commercial building picked up. The data added to evidence
that the United States may stave off recession this year.
Higher U.S. growth played into fears of rising consumer
prices around the world, sparked in part on Thursday by record
Spanish inflation and Belgian annual inflation at a 23-year
peak.
Benchmark euro zone government bond yields jumped to their
highest level since the credit crisis took hold in August and
British benchmark 10-year gilt yields rose above 5 percent for
the first time in seven months.
"It's the new theme. After focusing for so long on
financial worries the market is now focusing on inflation,"
said Gianluca Salford, a strategist at JP Morgan.
U.S. GDP grew at a revised 0.9 percent annual rate in the
first quarter, up from an anemic 0.6 percent estimated a month
ago, a rate that matched the fourth quarter of 2007, the
Commerce Department said.
The data could help persuade the Federal Reserve to pause a
campaign to cut interest rates and shift its focus to inflation
from flagging growth.
The yield on the benchmark 10-year U.S. Treasury note
traded as high as 4.12 percent, marking the loftiest level
since December.
The 10-year note <US10YT=RR> fell almost one full point and
was yielding 4.12 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell more than one point to yield 4.79 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.71 percent at 73.041, while against
the yen, the dollar <JPY=> rose 0.95 percent at 105.62.
The euro <EUR=> fell 0.84 percent at $1.5504.
Japanese shares posted their biggest increase in a month as
exporters and technology companies spurred a 3 percent rise in
the Nikkei <> on hopes U.S. demand for Asian goods will
stay strong in light of stronger U.S. business spending.
Asian stocks rose broadly, with MSCI's index of stocks
outside Japan <.MIAP0000PUS> gaining 1.3 percent.
(Reporting by Chris Reese, Steven C. Johnson in New York, and
Amanda Cooper, Ikuko Kao, Jamie McGeever and Karl Plume in
London. Editing by Richard Satran)
