Business | Fri Nov 9, 2012 10:30pm IST

U.S. stocks, oil rebound on strong consumer data

NEW YORK (Reuters) - U.S. stocks and crude oil prices rebounded on Friday on news that U.S. consumer sentiment rose to the highest level in more than five years in November, offsetting fears a looming "fiscal cliff" and Europe's sputtering economy may send the world into recession.

Still, world shares are set for their worst weekly performance since June, depressed by Europe's debt troubles and some $600 billion in automatic tax hikes and spending cuts to start in January if the U.S. Congress fails to act.

The surprisingly strong survey showing American consumers felt more optimistic about employment prospects and the outlook for the economy led U.S. stock prices and crude oil to turn higher in early trading.

"It was better than expected and the market seems to like it. It is a positive note, but the backdrop remains negative with a lot of negative sentiment. Still, we could be oversold enough that this could launch a rally," said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group in Greenwich, Connecticut.

The Dow Jones industrial average was up 41.89 points, or 0.33 percent, at 12,853.21. The Standard & Poor's 500 Index was up 8.10 points, or 0.59 percent, at 1,385.61. The Nasdaq Composite Index was up 21.28 points, or 0.73 percent, at 2,916.87.

European shares pared losses to turn higher on the U.S. data, which included a report that said wholesale inventories rose in September by the most in nine months as wholesalers sharply boosted stocks of farm goods and oil.

The FTSE Eurofirst 300 index of top European shares rose 0.06 percent to close at a provisional 1,098.41.

But falling industrial output in France, Italy and Sweden and a warning from a German ministry that the country's economy - Europe's largest - was expected to slow further in the fourth quarter and the first three months of 2013 rattled investors.

Also weighing on investors was news that euro zone finance ministers are unlikely to release a new tranche of loans to Greece on Monday as there is no agreement on how to make its debt sustainable.

Oil pushed higher in choppy trading, lifted by U.S. consumer sentiment and supportive Chinese data that countered pressure from concerns over Europe's debt problems and the looming U.S. fiscal cliff.

U.S. crude futures edged up 49 cents at $85.58 a barrel, while Brent futures were up 85 cents to $108.10 a barrel.

The euro dropped to a two-month low against the U.S. dollar and could extend losses as fears mount that the euro zone's debt crisis and deteriorating economic conditions could drag on global economic growth.

The euro was down 0.26 percent at $1.2712, and was seen vulnerable to further losses. The dollar index rose 0.3 percent to 81.023.

The MSCI world equity index was up 0.1 percent at 324.00. It has lost more than 2 percent since Monday and looked set to close on Friday with a decline steeper than any week since June.

Gold hit a three-week high of $1,738.66 an ounce before pulling back slightly. Spot gold prices rose $3.27 to $1,733.26.

Prices of safe-haven U.S. Treasuries extended their gains for the week after Tuesday's U.S. election raised fears that Washington's politicians may struggle to find a compromise to cut the budget deficit before nearly $600 billion of spending cuts and tax increases kick in early in 2013.

Markets are also watching the U.S. debt ceiling, which must be raised to avoid a government shutdown.

The benchmark U.S. Treasury 10-year note fell 4/32 in price to yield 1.6318 percent.

(Additional reporting by Richard Hubbard and Marc Jones in London; Reporting by Herbert Lash; Editing by Dan Grebler)

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