By Chuck Mikolajczak
NEW YORK (Reuters) - Global equity markets rebounded on Friday, paced by a strong rise in oil prices, but were still on track for a weekly decline, while the dollar managed to stem its slide against the yen.
Stocks on Wall Street and in Europe were lifted by energy names, as both Brent and U.S. crude oil saw gains of more than 5 percent on hopes a global excess of crude could be nearing a tipping point. Economic indicators from the U.S. and Germany cast a positive light on growth in fuel demand.
Global benchmark Brent crude futures jumped 5.3 percent to $41.53 per barrel, and were up more than 7 percent on the week. U.S. crude surged 6.2 percent to $39.55, for a 7.4 percent weekly gain.
The STOXX 600 Europe Oil and Gas index was more than 3 percent while the S&P energy index climbed 2 percent as the top performing sectors in each region, tracking the rise in crude prices.
The Dow Jones industrial average rose 88.62 points, or 0.51 percent, to 17,630.58, the S&P 500 gained 11.97 points, or 0.59 percent, to 2,053.88 and the Nasdaq Composite added 14.88 points, or 0.31 percent, to 4,863.24.
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"You've kind of got this story of we are still expanding but there is a litany of risks, or weak points, to the expansion that could easily become much larger very quickly," said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia. "That is why the market is hanging on every word from every Fed speaker, every indication that oil prices are going up or going down."
Despite Friday's gains, the S&P 500 was on course for its biggest weekly decline in two months.
MSCI's index of world shares rose 0.95 percent but was down 0.3 percent for the week. The FTSEurofirst 300 climbed 1.2 percent, but was still on pace for its fourth straight weekly decline, which would be its longest losing streak since October 2014.
Much of the volatility this week has been fueled by the yen's surge against the dollar, which caught many market participants off-guard and increased speculation Tokyo could intervene in the currency market to halt the rally.
The dollar briefly traded above 109.00 yen, recovering from its first break below 108.00 since October 2014 the previous day. Japan's Finance Minister Taro Aso said the government would take steps to counter "one-sided" moves in the yen in either direction.
The dollar was last up 0.4 percent at 108.66 yen, with a weekly fall of 2.7 percent. On Thursday it fell as low as 107.67 yen.
Sharp appreciation of the safe-haven yen against the dollar is often a warning sign of broader financial market stress and investor risk aversion, which has been exacerbated this week by growing uncertainty surrounding the U.S. economic and policy outlook.
Federal Reserve Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is on a solid course and still on track to warrant further interest rate hikes.
New York Fed President William Dudley on Friday said the central bank must approach further rate hikes cautiously and gradually because of lingering external risks to the U.S. economy, despite some strength at home and welcome hints of inflation.
The comments helped push benchmark 10-year Treasuries down 12/32 in price to yield 1.7306 percent after hitting a low six-week of 1.685 percent on Thursday.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski)