Stocks, oil gain as risk aversion ebbs

By Herbert Lash

NEW YORK (Reuters) - The widespread aversion to risk across financial markets this week eased on Thursday, lifting global stocks and commodity prices, including oil, while curbing the appeal of government debt.

The yen and the U.S. dollar fell, giving back some of the previous session's gains that were spurred by waning optimism about economic recovery prospects. A decline in U.S. initial jobless claims helped revive the appetite for risk.

Crude rebounded after tumbling below $60 a barrel, and other commodities gained as the sliding dollar helped boost the price of raw materials in local currencies.

Copper prices rebounded as investors took heart from comments by the International Monetary Fund on Wednesday that the global economy was slowly starting to pull out of the world's worst recession since World War Two.

European shares bounced after five straight sessions of losses, while the purchase of technology and commodity-related shares lifted U.S. equity markets.

"Markets are gaining back some of the losses, but the choppy performance will continue," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.

Shortly after 1:30 p.m., the Dow Jones industrial average .DJI was up 13.15 points, or 0.16 percent, at 8,191.56. The Standard & Poor's 500 Index .SPX rose 5.04 points, or 0.57 percent, to 884.60. The Nasdaq Composite Index .IXIC was up 12.34 points, or 0.71 percent, at 1,759.51.

Britain's top share index closed 0.5 percent higher on a fairly lackluster day of trading. The FTSE 100 .FTSE index closed 18.43 points firmer at 4,158.66.

The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.8 percent at 823.32 points.

Data from Germany capped a week of positive developments in Europe's largest economy, and a senior German official told Reuters the country's recession may have ended.

Its trade surplus widened unexpectedly in May to 10.3 billion euros ($14.3 billion) from 9.0 billion in April, its highest level since December, data from the Federal Statistics Office showed.

Higher stock prices helped reduce the safe-haven appeal of government securities, while a Bank of England decision not to boost its debt purchase program pared expectations the Federal Reserve would enlarge its Treasury buying plan.

U.S. Treasury debt prices fell, euro zone government bond futures eased and British government bonds tumbled on the BoE decision, propelling 10-year gilt yields almost a fifth of a point higher.

"It's a sentiment-driven issue, which the markets picked up when the Bank of England said it was not expanding its quantitative easing program -- which came as a surprise," said David Page, economist at Investec.

"The BoE particularly is looking at the development in the global economy as much as at the development in the UK economy, and that has implications for the euro zone outlook as well."