(Adds close of U.S. markets)
* Oil prices tumble more than $4 a barrel after early jump
* Bonds fall in global sell-off sparked by inflation fear
* U.S., European stocks rise, pulled by opposing sectors
By Herbert Lash
NEW YORK, May 29 (Reuters) - Oil prices tumbled $4 a barrel
on Thursday, helping to lift U.S. stocks that also rose on data
showing surprisingly strong economic growth, but government
bonds sold off around the world on growing inflation fears.
Oil slipped to under $127 a barrel as concerns about global
energy demand and strength in the dollar countered data that
showed the biggest fall in U.S. crude stockpiles since 2004.
The drop in oil prices soothed equity investors but failed
to rein in the rising fear of inflation among bond investors,
who sold off government debt and pushed yields in Japan, the
euro zone and the United States to levels last seen in 2007.
An upward revision to U.S. gross domestic product suggested
a recession in America may be avoided, giving stocks a boost,
especially early recovery cyclicals like financials and
companies that depend on discretionary spending.
Financial companies, the biggest drag on stock performance
this year, were some of the U.S. session's top performers.
Even though European shares rose, the leaders and decliners
were an exact opposite of U.S. markets. Energy shares rose in
Europe, and the banking sector declined amid fresh worries that
credit quality will hurt lenders.
"We're in a trading range because there's a fight going on
between people who think we're in a recession and those who
believe we're half-way out of this slow period," said John
Massey, portfolio manager at AIG SunAmerica Asset Management in
Jersey City, New Jersey.
The Dow Jones industrial average <> rose 52.19 points,
or 0.41 percent, at 12,646.22. The Standard & Poor's 500 Index
<.SPX> rose 7.42 points, or 0.53 percent, at 1,398.26. The
Nasdaq Composite Index <> added 21.62 points, or 0.87
percent, at 2,508.32.
JPMorgan Chase & Co <JPM.N> was one of the Dow's biggest
gainers, rising 1.8 percent to $43.62. It said its $1.5 billion
deal to acquire Bear Stearns Cos Inc <BSC.N> would be completed
on Friday, well ahead of earlier forecasts.
Further boosting financials were mounting expectations that
Bank of America's <BAC.N> deal to acquire mortgage lender
Countrywide Financial <CFC.N> would go through. Countrywide's
shares rose more than 8 percent to $5.38 while Bank of America
was up 2.1 percent at $34.58.
U.S. energy and materials stocks were the only sectors to
fall, hurt by a decline in commodity futures.
The FTSEurofirst 300 index <> of top European shares
rose 0.3 percent to close at 1,330.28 points.
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.
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.
Oil's decline extended its retreat from last week's record
above $135 a barrel amid growing signs global energy demand
growth is slowing under the strain of high costs and a U.S.
economic slowdown.
Oil briefly surged into positive territory after a U.S.
Energy Information Administration report showed an 8.8 million
barrel drop in U.S. crude stockpiles, the biggest fall since a
hurricane shut offshore oil platforms in September 2004.
But the EIA said the unexpected fall was due to temporary
delays in taking crude off oil tankers in the Gulf Coast.
U.S. crude <CLc1> settled down $4.41 to $126.62 a barrel,
while London Brent <LCOc1> fell $4.04 to $126.89 a barrel.
Gold and other precious metals futures ended sharply lower
as the drop in oil and the dollar's rise prompted a sell-off.
The August contract for gold <GCQ8> in New York settled
down $23.30 at $881.70 an ounce, while the June futures
contract slumped to a two-week low of $876.10.
The dollar extended gains on the rise in U.S. stocks. The
U.S. Dollar Index <.DXY>,which includes major currencies, was
up 0.70 percent at 73.038, and against the yen, the dollar
<JPY=> gained 0.89 percent at 105.56.
The euro <EUR=> fell 0.84 percent at $1.5505 against the
U.S. currency.
Bonds prices began their descent early in the U.S. session,
extending recent losses on the report that showed U.S. economic
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.
The 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 yield on the benchmark 10-year U.S. Treasury note
traded as high as 4.12 percent, marking the loftiest level
since December.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
off 23/32 to yield 4.09 percent, while the 30-year U.S.
Treasury bond <US30YT=RR> fell more than one point to yield
4.76 percent.
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 Richard Valdmanis, Frank Tang, Jennifer Coogan,
Chris Reese, Nick Olivari in New York)
(Reporting by Herbert Lash. Editing by Richard Satran)
