NEW YORK (Reuters) - Oil bounced from 18-month lows on Friday as investors shifted their focus to efforts to resolve Europe’s debt crisis, while U.S. stocks rebounded from the second-worst decline of the year.
The euro firmed against the yen after the European Central Bank said it would accept lower-quality assets as collateral in a move to aid the region’s shaky banks.
Investors worry that Europe’s debt crisis is adding to the slowdown in global economic growth. European stocks fell after data showed a drop in German business sentiment.
The leaders of Germany, France, Italy and Spain agreed on Friday on a 130 billion euro package to revive economic growth in Europe but split over issuing joint bonds to combat the euro zone’s debt crisis.
After the leaders met in Rome, Italian Prime Minister Mario Monti said the European Union should adopt a series of growth measures equal to about 1 percent of the region’s gross domestic product at a summit next week.
“The markets are looking for some sort of decision out of Europe that creates some sort of stability and optimism for that part of the world,” said Jason Rogan, director of Treasuries trading at Guggenheim Partners in New York.
Brent crude gained $1.75 to settle at $90.98 a barrel, though it fell 6.8 percent for the week. NYMEX August crude settled at $79.76 a barrel, gaining $1.56. For the week, front-month U.S. crude fell 5.1 percent. A potential storm threatening to disrupt oil production in the Gulf of Mexico helped support U.S. oil.
Led by gains in bank shares, the U.S. benchmark S&P 500 recovered some of Thursday’s drop of more than 2 percent, its second-worst fall of the year, caused by signs of weakness in global manufacturing.
The Dow Jones industrial average was up 68.27 points, or 0.54 percent, at 12,641.84. The Standard & Poor’s 500 Index was up 8.84 points, or 0.67 percent, at 1,334.35. The Nasdaq Composite Index was up 30.19 points, or 1.06 percent, at 2,889.28.
U.S. bank shares rose despite ratings agency Moody’s downgrading 15 of the world’s biggest banks on Thursday. It lowered credit ratings by one to three notches to reflect the banks’ risk of losses from volatile capital markets.
Morgan Stanley (MS.N) added 1.7 percent to $14.20 and Bank of America Corp (BAC.N) rose 0.9 percent to $7.89 as many of the ratings cuts were not as deep as expected. The KBW Bank index gained 1.3 percent.
World stocks dipped along with European shares after data showed German business sentiment fell for a second straight month in June to its lowest level in more than two years, according to the Ifo think tank. That data added to poor economic numbers this week from the United States, China and Europe.
World stocks, as measured by MSCI’s global equity index, were down 0.3 percent and European shares ended down 0.7 percent.
In the foreign exchange market, the euro was up 0.3 percent against the yen at 100.95.
“Anytime you can get the ECB more involved in this process, the market views that as a positive development. They’re the ones who can print the money,” said Bob Sinche, global head of currency strategy at RBS Securities in New York.
The gains in the euro kept gold prices steady near $1,565 an ounce, but the precious metal remained on track for its biggest weekly loss this year.
Spanish stocks rose 1.5 percent after independent audits on Thursday showed Spain’s banks will need up to 62 billion euros in capital, well below the 100 billion euro bailout ceiling.
Spanish bonds rallied for a fourth consecutive day. Spanish 10-year yields fell 21 bps to 6.41 percent. After peaking around 7.3 percent earlier this week, yields have fallen as investors take the view that policymakers will put in place the building blocks of a lasting solution to the bloc’s long-running debt crisis.
U.S. Treasuries prices fell. Benchmark 10-year notes were down 15/32 in price to yield 1.67 percent, up from 1.62 percent late on Thursday.