* Oil prices rally 5 pct on speculation on supply pact
* Wall Street shares rebound, Apple results in focus
* Jitters remain after China shares fall to 14-month low
* Hopes of dovish U.S. Fed lend some support
(Updates market action, adds quote)
By Richard Leong
NEW YORK, Jan 26 (Reuters) - Stock and oil prices rebounded
on Tuesday on hopes oil producers would cut output to address
the supply glut that has punished equity markets and pushed
crude values to 12-year lows.
Bets that oil exporters could reduce production helped scale
back some demand for low-risk yen and U.S. and German government
debt.
Investors also awaited more clues to whether the Federal
Reserve and other central banks will help stabilize markets that
have been roiled partly due to worries about weakening economic
growth in China.
The U.S. central bank is expected to leave interest rates
unchanged after its two-day policy meeting that began Tuesday
and signal it may not raise rates until mid-2016 at the
earliest. FED/DIARY
"Markets have recovered with a rise in oil prices, and that
indicates that the two are still strongly correlated. Today's
reversal could be the first step towards a short-term
improvement in equity prices," said Philippe Gijsels, head of
research at BNP Paribas (PA:BNPP) Fortis Global Markets in Brussels.
Top OPEC and Russian oil industry officials stepped up vague
talk on Monday of possible joint action to remedy one of the
worst supply gluts in decades. Others, including
Kuwait, said they doubt it will happen as long as others are
increasing their output.
Brent crude futures LCOc1 were last up $1.95, or 6.39
percent, at $32.45 a barrel and U.S. crude CLc1 was last up
$1.77, or 5.83 percent, at $32.11 per barrel.
The oil rebound rekindled some appetite for stocks.
In U.S. afternoon trading, the Dow Jones industrial average
.DJI was up 275.27 points, or 1.73 percent, to 16,160.49, the
S&P 500 .SPX was up 26.6 points, or 1.42 percent, to 1,903.68
and the Nasdaq Composite .IXIC was 55.58 points, or 1.23
percent, higher at 4,574.07.
Some nervousness ahead of Apple's AAPL.O quarterly results
later Tuesday, which are expected to show a sharp drop in iPhone
sales, was mitigated by encouraging U.S. data on home prices and
consumer confidence.
The pan-European FTSEurofirst 300 index .FTEU3 closed up
0.9 percent at 1,335.90.
Tokyo's Nikkei .N225 ended 2.4-percent weaker, part of a
broad decline across Asia.
Mainland Chinese shares .SSEC .CSI300 tumbled more than
6 percent to a 14-month low on renewed jitters over Beijing's
ability to calm domestic markets.
The yen was initially stronger against the dollar and euro
but reversed those gains with the rebound in stock and oil
prices. It was last down 0.2 percent against the greenback at
118.55 yen JPY= and down 0.2 percent versus the euro at 128.54
yen EURJPY= .
The dollar was weaker against a basket of currencies, last
down 0.2 percent at 99.161 .DXY .
Nagging worries about falling oil prices and the global
economy underpinned demand for U.S. and German government bonds.
Benchmark 10-year Treasury yield US10YT=RR dipped 2 basis
points to 2.005 percent. The 10-year Bund yield
DE10YT=RR declined 3 basis points to 0.443 percent.
Spot gold prices XAU= rose for a second day. It was last
rose $13.15 or 1.19 percent, to $1,120.81 an ounce. GOL/