* Oil prices rebound from multi-year lows
* Europe closes lower as early rally fades
* Fed rate decision due Wednesday
(Adds close of U.S. markets, oil settlement prices)
By Chuck Mikolajczak
NEW YORK, Dec 14 (Reuters) - Global equity markets swung
between gains and losses on Monday, as volatile oil prices
rebounded from multi-year lows while weakness in credit markets
weighed on sentiment ahead of an expected U.S. interest rate
hike later this week.
Brent crude LCOc1 settled down 0.03 percent at $37.92
after falling as low as $36.33 a barrel, its weakest since
December 2008. A fall below $36.20 would take oil down to levels
not seen since 2004. U.S. crude CLc1 settled up 1.9 percent at
$36.31 after earlier falling as low as $34.53.
The early declines in energy weighed on commodity stocks in
Europe, which turned negative after a positive start, while the
S&P energy sector .SPNY reversed course and was up 0.8 percent
after falling as much as 1.3 percent early in the session.
Jitters in high-yield bond markets, which are among the most
vulnerable to higher U.S. interest rates, also rattled
investors. Lucidus Capital Partners has liquidated
its entire portfolio and plans to return the $900 million it has
under management to investors next month, according to a media
report.
The SPDR Barclays (L:BARC) High Yield Bond ETF JNK.P was off 0.8
percent at $33.38 and the iShares iBoxx High Yield Corporate
Bond ETF HYG.P lost 0.9 percent at $78.83.
"It's the (Fed) communiqué that's going to count, but the
real problem here is the junk bond market, which is tied to oil
prices," said Peter Cardillo, chief market economist at First
Standard Financial in New York.
"A lot of paper written to oil companies is in question, and
so it ties in with the price of oil."
MSCI's all-country world index .MIWD00000PUS lost 0.4
percent, while the pan-European FTSEurofirst 300 .FTEU3 index
closed down 1.8 percent to 1,371.76, as an early gain of 1
percent evaporated.
The Dow Jones industrial average .DJI rose 103.29 points,
or 0.6 percent, to 17,368.5, the S&P 500 .SPX gained 9.57
points, or 0.48 percent, to 2,021.94 and the Nasdaq Composite
.IXIC added 18.76 points, or 0.38 percent, to 4,952.23.
Benchmark 10-year Treasury notes US10YT=RR lost 25/32 in
price to yield 2.252 percent.
The dollar edged higher but traded in narrow ranges,
although nervousness about what the Federal Reserve will say in
its post-meeting statement on Wednesday after an expected rate
hike has limited the greenback's upside.
The dollar index .DXY was up 0.1 percent at 97.66 and the
euro EUR= slipped 0.02 percent to $1.0986.
A Fed rate hike on Wednesday, following a two-day policy
meeting, is a near certainty in the eyes of investors. It would
be the first increase after nearly a decade of loose policy that
began with the onset of the global financial crisis and is
viewed as a first step toward normalizing monetary conditions.
Traders see an 83 percent chance the central bank will lift
its targeted rate range to 0.25 percent to 0.50 percent from the
current zero to 0.25 percent range, according to CME Group's (O:CME)
FedWatch program.
But against a backdrop of weakening oil prices and stress in
the high-yield bond market, the pace of future rate hikes is of
key interest to investors.