* U.S. stocks mostly little changed as oil shares surge
* Oil jumps on report that U.S. fuel inventories declined
* Dollar falls on renewed fears about U.S. growth outlook
* U.S. government debt falls; imports spur inflation fears
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 13 (Reuters) - Oil prices rose on Wednesday
on data showing an unexpected drop in U.S. fuel inventories,
further undermining equity markets already reeling from signs
of a slowing economy and persistent credit concerns.
The U.S. dollar edged lower against the euro after crude's
$3 a barrel spike rekindled worries about the U.S. economic
outlook. The dollar rose against the yen amid growing fears
high energy prices could further hurt the Japanese economy.
U.S. government debt prices fell after news that U.S.
import prices had risen more than expected in July, boosting
inflation concerns.
European shares fell more than 2 percent, knocked down by
sliding bank shares and crude oil's surge, although the biggest
gains in oil prices came after stock markets closed in Europe.
Apart from rising crude prices, U.S. stocks were also hit
by a surprising a profit shortfall at high profile manufacturer
Deere & Co <DE.N>, and disappointing retailer outlooks and
earnings.
The Nasdaq and the S&P 500 briefly turned positive in
afternoon trading. Oil's rise lifted energy companies, and
Apple Inc <AAPL.O> led the Nasdaq higher on plans to expand
sales of its iPhone in an alliance with top U.S. electronics
chain Best Buy <BBY.N>.
Banks fell sharply on both sides of the Atlantic on worries
about global growth and the still unsettled credit crunch. The
market was pressured by the expiration of a rule that helped
stem abusive short selling in shares of 19 U.S. financial
companies.
"The reality of the credit crisis isn't over," said Bart
DiLiddo, chairman of VectorVest Inc, a financial research firm
in Akron, Ohio. "The housing market hasn't bottomed yet. These
banks aren't going to become real money-makers for a while."
Stronger-than-expected U.S. import prices added to
investors' concerns that even as the economy slows, price
pressures are mounting. Another report showed retail sales fell
in July, albeit in line with expectations.
"The retail sales number this morning was another data
point suggesting that the economy is weakening and the consumer
is pulling back on their purchases," said Eric Kuby, chief
investment officer at NorthStar Investment Management Corp in
Chicago.
Bank of America <BAC.N> was the biggest drag on both the
Dow and S&P 500. Big oil was a counterweight to falling bank
stocks. Exxon Mobil <XOM.N> and Chevron <CVX.N> led gainers on
the S&P 500.
The Dow Jones industrial average <> fell 109.42 points, or 0.94 percent, at 11,533.05. The Standard & Poor's 500 Index
<.SPX> slid 3.76 points, or 0.29 percent, at 1,285.83. The
Nasdaq Composite Index <> slipped 1.99 points, or 0.08
percent, at 2,428.62.
U.S. Treasury debt prices fell despite falling stocks,
with some analysts citing a creeping reemergence of inflation
concerns as crude rallied on the eve of an inflation report due
on Thursday.
Renewed weakness in the financial sector, usually enough to
spur a bid for safe-haven government debt, failed to inspire
any Treasury market gains.
"The foremost factor might be inflation concerns," which
pushed government bond prices lower, said Kim Rupert, managing
director of global fixed income analysis with Action Economics
LLC in San Francisco.
The benchmark 10-year Treasury note's <US10YT=RR> price,
which moves inversely to its yield, fell 13/32 to yield 3.95
percent. The 30-year Treasury bond's <US30YT=RR> price fell
19/32 to yield 4.58 percent.
Banks were the worst performing sector in Europe, weighed
down by renewed worries about the damage from the credit crunch
on corporate balance sheets.
Royal Bank of Scotland <RBS.L> fell 6.4 percent, making it
the top individual drag on the European market. UBS <UBSN.VX>
fell 7.25 percent, France's BNP Paribas <BNPP.PA> slid 4.85
percent and Societe Generale <SOGN.PA> was off 6 percent.
Equities have been on the mend "because of falling crude
and falling commodities, but these are not good enough to lift
markets because prices are still ... above levels seen last
year," said Heino Ruland, a strategist with FrankfurtFinanz.
The rise in oil quickly pushed stocks into a reversal of
recent gains, as a key consumption report lifting energy
prices.
Gasoline supplies fell by 6.4 million barrels, the Energy
Information Administration said, more than the 2.1 million
barrel decline analysts expected. Distillates inventories
unexpectedly fell.
"Draws (which reduce supply) are bullish across the board.
Lower refinery output and lower imports led to the draws in the
products for the past week," said Tim Evans, energy analyst at
Citi Futures Perspective in New York.
U.S. crude <CLc1> settled up $2.99 at $116.00 a barrel
after demand concerns sent prices down to a three-month low of
$112.31 during intraday activity on Tuesday. London Brent
<LCOc1> rose $2.33 to $113.47 a barrel.
Gold ended 1.4 percent higher as crude oil prices surged in
response to a dip in U.S. oil product stocks, and on
expectations jewellery demand will recover after the precious
metal's recent price slip.
Gold <XAU=> was at $825.85/826.85 by New York's last
quote.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.15 percent at 76.243. Against the yen,
the dollar <JPY=> was down 0.29 percent at 109.53.
The euro <EUR=> rose 0.05 percent at $1.4927.
Asian stocks dropped, with shares outside Japan falling to
a 17-month low, on fears of a sharp global slowdown.
Japan's Nikkei share average <> fell 2.1 percent, and
stocks elsewhere in Asia-Pacific <.MIAPJ0000PUS> slid to the
lowest since March 2007, according to an MSCI index. The index
is off 32 percent from a life high in November.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Ellen
Freilich in New York and Amanda Cooper, Alastair Sharp, Jan
Harvey and Ian Chua in London)
(Writing by Herbert Lash. Editing by Richard Satran)
