Oil rises on U.S. housing data

By Herbert Lash

NEW YORK (Reuters) - Oil and other commodity prices rose on Friday after U.S. housing data bolstered prospects of economic recovery but a mixed batch of U.S. corporate earnings raised concerns and kept Wall Street stocks straddling break-even.

The U.S. dollar recovered from steep losses earlier in the week as General Electric (GE.N) lowered its outlook and Bank of America (BAC.N) warned of a fresh surge in soured loans, enhancing the greenback's safe-haven appeal.

Oil rose for a fifth straight day and gained 6.1 percent on the week, partially reversing a 10 percent plunge last week, while copper prices climbed to a five-week high after an unexpected jump in U.S. home starts in June boosted hopes for recovery.

European shares and London's top share index both posted a fifth consecutive gain, but U.S. stocks traded lower for much of the session while the S&P 500 ended slightly lower.

A strong outlook late Thursday from International Business Machines (IBM.N), the world's largest technology services provider, lifted the Nasdaq and the Dow above break-even.

For the week, U.S. stocks posted their best gains since mid-March, with all three major indexes ending 7 percent or more higher.

Investors were caught between further signs that a global recession was ending and concerns that any recovery is still weak and the economy still must overcome a number of hurdles.

"There's still an underlying tone of risk aversion looming. People don't feel comfortable with the economy," said Melvin Harris, strategist at Advanced Currency Markets in New York.

"Earnings today were not stellar while housing starts data was good but is a volatile indicator," he said.

The Dow Jones industrial average .DJI closed up 32.12 points, or 0.37 percent, to 8,743.94. The Standard & Poor's 500 Index .SPX slipped 0.36 point, or 0.04 percent, to 940.38. The Nasdaq Composite Index .IXIC added 1.58 points, or 0.08 percent, to 1,886.61.

In Europe, the pan-European FTSEurofirst 300 .FTEU3 index of top shares closed up 0.4 percent at 870.56 points, while the FTSE 100 .FTSE closed up up 0.6 percent at 4,388.75.

Oil rose 2.5 percent in its first weekly gain in a month on optimism over the U.S. housing data.

U.S. crude oil for August delivery settled up $1.54 at $63.56 a barrel. London Brent crude for September rose $1.63 to settle at $65.38 a barrel.

"Oil is rebounding because there's a sense we have probably overplayed pessimism about the economy lately, and prices had fallen too far," said Phil Flynn, an analyst at PFGBest Research in Chicago.

A 14.4 percent jump in single-family home starts, the biggest rise since December 2004, propelled a 3.6 percent in U.S. housing starts and dampened demand for safe-haven U.S. government debt.