* Oil surges over 2 pct to June highs
* U.S. stocks gain after two days of losses
* European markets rattled by ECB "taper" talk
(Updates with opening of U.S. markets; changes dateline,
By Lewis Krauskopf
NEW YORK, Oct 5 Oil prices surged on Wednesday
after a report showed a drop in U.S. crude stockpiles, fuelling
energy shares and helping lift Wall Street after two down
In Europe, bond yields jumped while pan-European STOXX index
slumped 0.6 percent, with markets rattled by the
prospect of the region's central bank eventually winding down
its bond-buying stimulus.
Oil prices rose to their highest since June after the U.S.
government reported another surprise weekly drawdown in crude
The U.S. Energy Information Administration (EIA) said crude
stockpiles fell nearly 3 million barrels for the week ended
Sept. 30, marking a fifth straight weekly drop. Analysts polled
by Reuters had forecast a build of 2.6 million barrels.
Brent crude was up 2.1 percent, at $51.94 a barrel,
while U.S. West Texas Intermediate crude rose 2.3 percent
The Dow Jones industrial average rose 111.34 points,
or 0.61 percent, to 18,279.79, the S&P 500 gained 9.25
points, or 0.43 percent, to 2,159.74 and the Nasdaq Composite
added 30.66 points, or 0.58 percent, to 5,320.31.
The energy sector gained 1.5 percent.
U.S. stocks have been pressured this week by concerns over
Britain's exit from the European Union and expectations of a
Federal Reserve interest rate increase in the coming months.
Chicago Federal Reserve Bank President Charles Evans said he
would be "fine" with raising U.S. interest rates by year-end if
U.S. economic data continued to come in firm.
Traders see a 64-percent chance the Fed will hike at its
December meeting, according to the CME FedWatch website.
"People are certainly waiting for that inevitable interest
rate rise by the Fed, but I think they're just not sure if
that's a sign that things are better and earnings are likely to
improve, or a reason for people to sell stocks because rates are
rising," said Rick Meckler, president of LibertyView Capital
Management in Jersey City, New Jersey.
Euro zone bond yields soared amid concerns the European
Central Bank might reduce its asset purchases before the program
finally ends. A Bloomberg article on Tuesday cited sources as
saying the ECB would probably wind down the monthly 80-billion
euro ($90 billion) scheme gradually.
Germany's 10-year Bund yield - the euro zone
benchmark - rose more than 8 basis points to nearly flat.
Italy's 10-year bond yield rose nearly 10 basis
points to 1.358 percent.
"I am surprised at the reaction, but it's just this notion
that the ECB may be discussing tapering one day that has upset
the market," said ING rates strategist Benjamin Schroeder.
Benchmark U.S. 10-year notes were last down
11/32 in price to yield nearly 1.72 percent, up from 1.68
percent late Tuesday.
A report showed U.S. private employers added 154,000 jobs in
September, below economists' expectations, with the more closely
watched U.S. jobs report due on Friday.
The dollar was down 0.04 percent against a basket of
currencies in choppy trading.
Sterling rose 0.3 percent against the dollar, after
dipping below $1.27 and hitting a fresh three-decade low against
the greenback earlier in the session.
(Additional reporting by Barani Krishnan in New York and Nigel
Stephenson in London; Editing by Susan Thomas and Nick