(Recasts with U.S. markets, adds byline; dateline previous LONDON)
By Herbert Lash
NEW YORK, March 27 (Reuters) - Renewed central bank efforts to ease a global credit crisis buoyed investor sentiment on Thursday, pushing up European shares and lifting some U.S. stocks, as the dollar rose on hopes for a mild U.S. slowdown.
U.S. Treasury debt prices fell, driven by a perception credit market strains might lessen, which would dull the lure of safe-haven U.S. government debt.
Oil rose to more than $106 a barrel on supply concerns after saboteurs blew up a major pipeline in Iraq and sharply reduced exports from the south of the country.
The oil gain was limited by a firmer dollar, which rallied after steep losses the last two sessions as concerns eased about a sharper U.S. economic slowdown. Data showing the U.S. economy growth in the fourth quarter was in line with market expectations and a separate report showed jobless claims declined in the latest week.
European shares rose to a two-week high as comments by the European Central Bank that it would pump extra liquidity as needed propelled shares in the battered banking sector.
Also, the central banks of Britain and Switzerland added extra funds to ease pressure on high interbank lending rates.
Investors also took comfort in a speech by a regional president of the Federal Reserve who reinforced a view that policy-makers will do what it takes to ease the credit crunch.
The Fed has been forced to broaden its policy arsenal in order to minimize the effects of the crisis on a vulnerable economy, said Cleveland Fed President Sandra Pianalto. Turbulent times called for extraordinary measures, she said.
“Now the Fed is out saying they have a responsibility to fund banks, trying to inject calm into the markets. The Fed is going to stand in there,” said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey:
U.S. stocks shed earlier losses but technology shares remained under the weather on fears of a slowdown after Oracle Corp’s ORCL.O quarterly revenue missed Wall Street estimates.
Technology stocks were the biggest drags on the benchmark Standard & Poor's 500 Index .SPX. Oracle slid about 7.5 percent while Google Inc (GOOG.O) fell 3.5 percent after Lehman Brothers cut its first-quarter profit forecast on expectations a weakening economy that could hurt advertising budgets.
The Dow Jones industrial average .DJI rose 15.80 points, or 0.13 percent, to 12,438.66. The Standard & Poor's 500 Index .SPX gaomed 2.96 points, or 0.22 percent, to 1,344.09 while the Nasdaq Composite Index .IXIC fell 11.33 points, or 0.49 percent, to 2,313.03.
European shares closed up 1 percent, lifted by financial shares.
The FTSEurofirst 300 index .FTEU3 of top European shares gained 1 percent to close at an unofficial 1,271.03 points, having risen by as much as 1.7 percent earlier in the day.
“The market is still very, very jittery but I think it wants to believe that the central banks can solve the problem,” said Andrew Lynch, a portfolio manager at Schroders.
Asian stocks fell as financials slipped on concerns over bank earnings, but gains in commodities helped cushion the fall.
Bank shares, including Japan’s Mitsubishi UFJ (8306.T) and Australia’s Macquarie Group (MQG.AX), were among the biggest decliners after downgrades of big U.S. commercial banks and a profit warning from Deutsche Bank (DBKGn.DE) on Wednesday.
Tokyo's Nikkei .N225 closed 0.8 percent lower and MSCI's index of other Asian shares .MSCIAPJ fell 0.03 percent.
Economic data released early in the New York session did not change expectations of further U.S. interest rate cuts to boost a weakening economy, but it eased concerns about a much sharper slowdown.
“The numbers this morning had an impact on the dollar. We’ll take any upside surprise we can get at this point,” said Rhonda Power, corporate trading manager at Travelex Global Business Payments in Toronto.
“But there are still some significant concerns about the economy. With this subprime situation unresolved, we think there is still negativity in the market,” she added.
In midday New York trading, the euro EUR= was down 0.4 percent on the day at $1.5777, a bit more than 1 cent below last week's record highs above $1.59. But the euro was still up more than 8 percent this quarter, remaining on track for its strongest quarterly performance since late 2004.
Oil’s gain was limited by a firmer U.S. dollar.
“Today’s action was driven up by the explosion and catching fire of a pipeline in Iraq, but then the market sold off on the jobless numbers,” said Nauman Barakat of Macquarie Futures USA. “This in turn strengthened the dollar.”
U.S. crude CLc1 was up 43 cents to $106.33 a barrel by 1411 GMT, having earlier risen as high as $107.70. London Brent crude LCOc1 advanced 52 cents to $104.51.
Gold eased but analysts said sentiment was positive and the metal may retest the $1,000-mark in the near term.
The metal, traditionally seen as a hedge against oil-led inflation, was also expected to get support from strong oil prices that jumped after an oil pipeline explosion in Iraq.
Spot gold XAU= hit a high of $954.50 an ounce before falling, down from $949.00/949.80 in New York on Wednesday.
At midday, the price of the benchmark 10-year Treasury note US10YT=RR, which moves inversely to its yield, was down 4/32, its yield at 3.50 percent, up from 3.46 percent on Wednesday. (Reporting by Justin Grant, Ellen Freilich, Gertrude Chavez-Dreyfuss in New York and Amanda Cooper, Atul Prakash, Ikuko Kao and Alex Lawler in London) (Writing by Herbert Lash. Editing by Richard Satran)