Global stocks barely extend rally on emerging markets strength; oil gains wane

By Chuck Mikolajczak

NEW YORK (Reuters) - A gauge of stocks around the globe edged higher on Thursday, to extend its best run of the year, as signs of a stabilization in oil prices lifted emerging markets while earnings in Europe and the United States limited gains.

Brent crude settled down 0.6 percent to $34.28 while U.S. crude settled up 0.36 percent at $30.77 as the commodity pared earlier gains after data showed a build in U.S. crude oil inventories.

Brent had earlier climbed above $35 a barrel and has gained 1.5 percent so far this week after Iran welcomed plans by Russia and Saudi Arabia to freeze output.

U.S. oil has gained 4.5 percent so far this week.

The dollar gained slightly against a basket of currencies even after comments on Wednesday from one of the Federal Reserve's traditional "hawks," James Bullard, that it would be "unwise" now for the central bank to keep hiking rates given low inflation expectations and market volatility.

The uptick in commodities and stall in dollar strength helped boost emerging market stocks with the MSCI Emerging market index rising 1.2 percent, after touching its highest level in six weeks.

"Oil prices rising, it helps emerging markets, the notion that the Fed has no rate hike in March, it helps emerging markets," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"Right now, over $30 (oil) is helpful for the tone in the market."

Economic data continued to indicate labour market strength, keeping rate hikes on the table for this year, but manufacturing activity continues to struggle.

Wall Street was lower with consumer stocks weighing on the S&P 500 after Wal-Mart reported a decline in quarterly earnings and cut its full-year forecast. IBM advanced after a Morgan Stanley upgrade and helped cap losses.

The action in stocks followed the best three-day run for the S&P 500 since August. MSCI's index of world shares was up 0.06 percent and is up 5 percent over the past four sessions, its best four-day run since October.

The Dow Jones industrial average fell 40.61 points, or 0.25 percent, to 16,413.22, the S&P 500 lost 8.99 points, or 0.47 percent, to 1,917.83 and the Nasdaq Composite dropped 46.53 points, or 1.03 percent, to 4,487.54.

European equities fell back in a choppy session after climbing to a two-week high on Thursday, as gains in tech shares were counteracted by a decline in commodity related stocks in the energy and mining sectors.

The pan-European FTSEurofirst 300 index shed 0.14 percent as the overall earnings picture remained weak.

Europe's session was volatile as EU leaders began a two-day summit in Brussels. But the mood improved after European Commission President Jean-Claude Juncker said he was "quite confident" a deal would be reached to keep Britain in the EU.

Prime Minister David Cameron said hard work and good will should help him clinch a deal at the summit, described by leaders of the 28-nation bloc as the best chance of preventing Britain leaving.

U.S. Treasury debt prices rose as the rally in stocks was interrupted. Benchmark 10-year Treasury notes last traded 21/32 higher in price for a yield of 1.7448 percent.

The euro slipped 0.32 percent versus the greenback at $1.1091 and the yen was up 0.74 percent against the dollar at 113.24.

Safe-haven gold added 2.2 percent to $1,234.76.

(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama)