new York 06 22, 2012, 21:30 IST
Oil bounced from 18-month lows on Friday as investors shifted focus to efforts at resolving Europe's debt crisis instead of weak economic data and U.S. stocks rebounded from the second-worst decline of the year.
The euro firmed against the U.S. dollar after the European Central Bank said it would accept lower-quality assets as collateral in a move to aid the region's shaky banks.
Investors worry that Europe's debt crisis is adding to the slowdown in global economic growth. European stocks fell after data showed a drop in German business sentiment.
The leaders of Germany, France, Italy and Spain met in Rome on Friday to find ways to restore confidence in the euro zone before an EU summit next week, which Italy's prime minister called a defining moment.
"The markets are looking for some sort of decision out of Europe that creates some sort of stability and optimism for that part of the world," said Jason Rogan, director of Treasuries trading at Guggenheim Partners in New York.
Though higher on the day, Brent crude oil was still headed for its worst weekly drop in a year, having fallen more than 8 percent this week. Brent crude was last up $1.66 at $90.89 a barrel.
The U.S. benchmark S&P 500 recovered some of Thursday's drop of more than 2 percent, its second-worst fall of the year, caused by signs of weakness in global manufacturing.
The Dow Jones industrial average was up 64.90 points, or 0.52 percent, at 12,638.47. The Standard & Poor's 500 Index was up 5.32 points, or 0.40 percent, at 1,330.83. The Nasdaq Composite Index was up 17.24 points, or 0.60 percent, at 2,876.33.
U.S. bank shares rose despite ratings agency Moody's downgrading 15 of the world's biggest banks on Thursday. It lowered credit ratings by one to three notches to reflect the banks' risk of losses from volatile capital markets.
Morgan Stanley
World stocks dipped along with European shares, however, after data showed German business sentiment fell for a second straight month in June to its lowest level in more than two years, according to the Ifo think tank. That data added to poor economic numbers this week from the United States, China and Europe.
World stocks, as measured by MSCI's global equity index, were down 0.5 percent and European shares were down 0.6 percent.
In the foreign exchange market, the euro hit the session's peak of $1.2583 and was last at $1.2565, up 0.2 percent.
"Anytime you can get the ECB more involved in this process, the market views that as a positive development. They're the ones who can print the money," said Bob Sinche, global head of currency strategy at RBS Securities in New York.
The gains in the euro kept gold prices steady near $1,565 an ounce, but the precious metal remained on track for its biggest weekly loss this year.
SPANISH STOCKS UP
Spanish stocks rose 1.8 percent after independent audits on Thursday showed Spain's banks will need up to 62 billion euros in capital, well below the 100 billion euro bailout ceiling.
Spanish and Italian 10-year bond yields rose but were not as high as earlier this week when Spanish yields climbed above the 7 percent level considered unsustainable.
U.S. Treasuries prices fell as investors looked ahead to $99 billion in new short and intermediate-dated debt next week. Benchmark 10-year notes were 7/32 in price to yield 1.66 percent, up from 1.62 percent late on Thursday.
