U.S. stocks edge up in late rebound, dollar falls

By Richard Leong

NEW YORK (Reuters) - U.S. stock prices rose on Wednesday in a late rebound with the oil market and an encouraging economic report from the Federal Reserve, but equity prices in other major world markets fell on worrisome Chinese and European factory data.

The U.S. dollar slipped on fresh doubts about a Federal Reserve interest rate rise in June and Japan's postponement of a sales tax increase.

Oil prices had tumbled earlier on expectations major oil producers would not reach a deal to freeze output at an OPEC meeting on Thursday before buying emerged in late trading.

U.S. Treasury bond prices ended lower on the late bounce in stock and commodity prices.

"The numbers are not bad; they're just not good either," Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, said about recent economic data. "We're kind of trapped in limbo that way with respect to a lot of the fundamentals."

Earlier on Wednesday, a survey showed China's factory activity shrank for a 15th straight month in May as new orders fell, while a gauge on euro zone manufacturing activity declined to a three-month low last month.

U.S. manufacturers fared better than their overseas counterparts as they unexpectedly reported slightly faster growth in May according to the Institute for Supply Management, but data from Markit showed U.S. factory growth slipping to its lowest since 2009.

A steep drop in construction spending in April, which was the biggest in over five years, also raised doubts about a U.S. rate hike.

Even counting those wobbly sectors, the Federal Reserve's latest Beige Book released late Wednesday showed modest growth across most economic regions.

Wall Street erased earlier losses following the Fed's report.

The Dow Jones industrial average was up 7.64 points, or 0.04 percent, to 17,794.84, the S&P 500 was up 2.61 points, or 0.12 percent, to 2,099.57 and the Nasdaq Composite was up 6.92 points, or 0.14 percent, to 4,954.98.

The pan-European FTSEurofirst 300 fell 1 percent at 1,350.34, led by the resources sector <.SXPP>.

Toyko's Nikkei <.N225> ended down 1.6 percent.

The MSCI world index , which tracks shares in 45 countries, shed 0.1 percent, retreating from a one-month high struck earlier this week.

Brent crude settled down 17 cents or 0.34 percent at $49.72 a barrel, while U.S. crude ended 9 cents or 0.18 percent lower at $49.01.

Prospects of weak global economic growth may keep the U.S. central bank from raising interest rates at its policy meeting in two weeks. Futures markets implied traders saw a 23-percent chance of a rate hike at the Fed's upcoming meeting, down from 38 percent last week.

Bets on no action from the Fed later this month stoked selling of the U.S. dollar.

The dollar index , which measures the greenback against six currencies, fell 0.5 percent at 95.413.

The U.S. currency fell to a two-month low against the yen after Japanese Prime Minister Shinzo Abe delayed a planned sales tax hike. The greenback was down over 1 percent at 109.51 yen.

The yield on U.S. 10-year Treasury yield rose 1 basis point to 1.846 percent in late trading with the recovery in U.S. stock prices.

Gold prices turned negative, erasing earlier gains. Spot gold fell $3.58 or 0.29 percent, to $1,211.11 an ounce.

(Additional reporting by Lewis Krauskopf in New York; Sujata Rao, Atul Prakash and Dhara Ranasinghe; Editing by Clive McKeef and Nick Zieminski)