Shares gain as global economy fears ease; oil rallies

By Sam Forgione

NEW YORK (Reuters) - U.S. and European shares rebounded from recent weakness on Friday, with reassuring U.S. retail sales data boosting sentiment, while U.S. crude prices rallied from more than 12-year lows.

Banking shares in the United States and Europe spiked, with the S&P financial index (.SPSY) closing up 4 percent and the STOXX 600 Europe Banks index (.SX7P) gaining 5.6 percent.

The U.S. S&P 500 (.SPX) gained about 2 percent after five days of losses that had dropped it to its lowest level in two years on Thursday, but still posted its second straight weekly decline.

In Europe, advances in shares of Deutsche Bank (DBKGn.DE) and its rival Commerzbank (CBKG.DE) of 11.8 percent and 18 percent, respectively, helped European stocks rebound.

The FTSEurofirst 300 (.FTEU3) index of top European shares notched its biggest daily gain in five and a half months after hitting a two-and-a-half-year low on Thursday. The index ended up 3.04 percent at 1,232.09.

The S&P financial index has fallen more than 14 percent this year, and the European bank index nearly 25 percent, battered by intensified worries about the impact of central banks' negative interest rate policies on banks' profitability.

Commerce Department data showing U.S. retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent in January also boosted optimism.

"Europe was strong, especially the banks, and that appeared to have some positive carryover effect on banking stocks here in the U.S.," said John Carey, portfolio manager at Pioneer Investment Management in Boston.

MSCI's all-country world equity index, which on Thursday closed more than 20 percent below its all-time high to confirm a bear market in global equities, rebounded 3.9 points, or 1.1 percent, to 357.25. Mainland China markets reopen on Monday after the Lunar New Year holiday.

U.S. stock and bond markets will be closed Monday for the Presidents Day holiday.

On Friday the Dow Jones industrial average (.DJI) ended up 313.66 points, or 2 percent, at 15,973.84. The S&P 500 (.SPX) closed up 35.7 points, or 1.95 percent, at 1,864.78. The Nasdaq Composite (.IXIC) closed up 70.68 points, or 1.66 percent, at 4,337.51.

The S&P energy index (.SPNY) ended up 2.6 percent. Oil prices surged on prospects for a coordinated production cut sparked by comments from the energy minister of OPEC member United Arab Emirates.

U.S. crude settled up 12.32 percent at $29.44 a barrel after hitting $26.05 a barrel on Thursday, a more than 12-year low. Brent crude settled up 10.98 percent at $33.36 a barrel.

Safe-haven 10-year Treasury notes were last down 27/32 in price to yield 1.74 percent after hitting 1.53 percent Thursday, their lowest yield since Aug. 2012.

"The upbeat retail numbers provided a rebound and the fear-trade we saw all week seems to have moved on for now," said Kathy Jones, chief fixed income strategist at Charles Schwab & Co. in New York.

The dollar index, which measures the greenback against a basket of six rivals (.DXY), was last up 0.4 percent.

Spot gold (XAU=) was down 0.7 percent at $1,237.66 an ounce, but has risen 5.5 percent this week, on track for the biggest weekly gain since October 2011.

(Additional reporting by Caroline Valetkevitch, Dion Rabouin and Tariro Mzezewa in New York, Libby George in London and Aastha Agnihotri in Bengaluru; Editing by Nick Zieminski and Bernadette Baum)