Shares pare losses on U.S. data, dollar rebounds

By Herbert Lash

NEW YORK (Reuters) - Crude oil prices fell to a four-year low before rebounding and global equity markets declined again on Thursday as investors fretted about world growth and a resurgent European debt crisis after two years of stability.

Fresh data indicating strength in the U.S. economy helped pan-world stock indexes pare losses that had exceeded 1 percent earlier and cut the bid for safe-haven government debt, driving up yields.

On Wall Street, the major indexes see-sawed between negative and positive territory, with the Standard & Poor's 500 index and Nasdaq composite index closing slightly higher.

MSCI's all-country world index (MIWD00000PUS), which gauges stocks in 45 countries and is a widely used global benchmark, closed 9.6 percent below its record closing high on July 3 after trading low enough for most of the session to be a correction.

Data showed the number of Americans filing new claims for jobless benefits fell to a 14-year low last week, and industrial output rose sharply in September also helped the dollar recover.

Economic growth is strong enough, though slower than in past recoveries, to turn the recent sell-off around, said Dan Morris, global investment strategist at TIAA-CREF.

"The reason for that is underlying earnings for S&P 500 companies. It's been pretty consistently upward, and we think it's going to go continually upward," Morris said. "The underlying fundamentals support a rebound."

Of the 63 companies in the S&P 500 that have reported results, 65.1 percent beat expectations, above a 20-year average but slightly lower than the past four quarters, Thomson Reuters data show. The blended revenue growth estimate is 4.1 percent.

MSCI's all-country world index (MIWD00000PUS) fell 0.13 percent to 392.71, while the pan-European FTSEurofirst 300 (FTEU3) index closed down 0.49 percent at 1,245.78.

The Dow Jones industrial average (DJI) closed down 24.5 points, or 0.15 percent, at 16,117.24. The S&P 500 (SPX) rose 0.27 points, or 0.01 percent, to 1,862.76 and the Nasdaq (IXIC) added 2.07 points, or 0.05 percent, at 4,217.39.

The dollar mostly recovered on the view that Wednesday's sell-off was overdone given the relative strength of the U.S. economy and the Federal Reserve's commitment to tighten monetary policy.

A disappointing auction of Spanish debt and data showing that deflation hit five peripheral euro zone countries in September underscored the relative health of the U.S. economy and the divergent outlook for Fed and European Central Bank policy.

The euro was last down 0.25 percent against the dollar at $1.2804. The euro hit an 11-month low against the Japanese yen, at 134.16 yen.

The dollar was last up 0.39 percent against the yen at 106.31 yen.

Brent and U.S. crude recovered. Brent has lost more than 28 percent since June. Losses have accelerated in October on signs the Organization of the Petroleum Exporting Countries has no plan to cut output.

Brent crude for November delivery settled 69 cents higher at $84.47 a barrel. Earlier it had dropped to $82.60 a barrel, the lowest since November 2010.

U.S. crude rose 92 cents to settle at $82.70 a barrel.

U.S. Treasuries prices fell. Benchmark 10-year notes (US10YT=RR) were down 18/32 in price to yield 2.1550 percent.

"It seems that we have reached a level that owning 10s at 2 (percent yields) is no longer interesting, no matter what the market thinks the future of the macroeconomic situation is," said Tyler Tucci, Treasuries strategist at RBS Securities in Stamford, Connecticut.

In Europe, Greek government bonds were the hardest hit, with 10-year yields rising to nearly 9 percent, while Spain missed its target at a bond auction due to weak demand from investors.

Yields on 10-year German Bunds rose to 0.819 percent, after slumping to a new low of 0.716 percent.

(Reporting by Herbert Lash in New York; Additional reporting by Marc Jones in London; Editing by Leslie Adler, Diane Craft and Richard Chang)