NEW YORK The energy sector led gains in U.S. shares on Thursday and European shares pared losses as oil prices rebounded from 12-year lows.
Major U.S. indexes rose after sinking to 3-1/2 months lows on Wednesday. Gains in stocks and oil also helped push the U.S. dollar higher, while the rebound in risk assets reduced demand for safe-haven gold and U.S. government debt.
Equity markets have tumbled to start the year as volatility in Chinese shares and the persistent slide in oil made investors jittery about the health of the global economy.
Oil prices rose more than 1 percent, and the commodity's turn may have prompted investors to cover short positions in commodity-related shares, said Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina. The S&P energy group was the best-performing sector.
"The stock market seems to be trading very coincident with the price action in oil," Todd said.
The Dow Jones industrial average rose 131.59 points, or 0.81 percent, to 16,283, the S&P 500 gained 14.23 points, or 0.75 percent, to 1,904.51 and the Nasdaq Composite added 18.04 points, or 0.4 percent, to 4,544.11.
Better-than-expected results from JP Morgan also gave a boost to what is expected to be a dour U.S. corporate earnings season.
The pan-European was down 1.5 percent, hurt by a slump in the auto sector as Renault faced an emissions probe, but the index came off its 13-month lows.
MSCI's broadest gauge of stocks globally fell 0.4 percent.
Benchmark brent oil snapped an eight-day rout as some players covered short positions after crude prices plumbed new 12-year lows on fears of adding Iran adding to global oversupply quicker-than-thought.
Traders said options expiry for the front-month contract in U.S. crude, scheduled at Thursday's settlement, was also pushing players to cover positions.
"Natural covering interest is buoying the market as many had $30 as an objective," said Pete Donovan, broker at Liquidity Energy in New York.
U.S. crude prices rose 2 percent to $31.11 a barrel, while benchmark Brent crude rose 1.5 percent to $30.75 a barrel.
Concern about a supply glut has helped drag down oil prices to around 12-year lows.
The dollar rose, bolstered by gains in the U.S. stock market and a rebound in oil prices, suggesting that the Federal Reserve will not be as constrained to push ahead with its plan to raise interest rates several times this year.
The Federal Reserve will raise interest rates three times this year, a Reuters poll of economists found.
The U.S. dollar rose 0.3 percent against a basket of currencies, while the euro fell 0.3 percent against the dollar.
Prices on U.S. Treasuries turned negative as oil prices steadied. Benchmark 10-year U.S. Treasury notes fell 4/32 in price to yield 2.0786 percent, from 2.066 late on Wednesday.
Spot gold fell 1 percent as the oil price rebound and rise in U.S. shares blunted bullion's appeal as a haven.
(Additional reporting by Tariro Mzezewa, Barani Krishnan and Gertrude Chavez-Dreyfuss in New York, Marc Jones in London, Lisa Twaronite in Tokyo; Editing by Kevin Liffey, Raissa Kasolowsky and Nick Zieminski)
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