* Stocks gain after Bernanke says rates to remain very low
* US dollar slips vs euro on news of record-low home sales
* Bonds gain on relief rally after Bernanke comments
* Oil jumps over $80 a barrel as dollar weakens (Updates with close of European markets)
By Herbert Lash
NEW YORK, Feb 24 (Reuters) - Global stocks rose and theU.S. dollar fell on Wednesday after Federal Reserve ChairmanBen Bernanke reaffirmed his commitment to keep U.S. interestrates at exceptionally low levels for an extended period.
Oil prices bounced more than $1 to over $80 a barrel asBernanke"s testimony before a congressional committee buoyedhopes that low interest rates will spur the economy, despitebearish U.S. crude inventory figures. For details see:[ID:nSGE61N078]
U.S. Treasury prices rose on Bernanke"s comments, whichgave bond investors added relief after the Fed"s surprisediscount rate hike last week raised fears that an increase inthe fed funds rate would happen sooner than initially thought.
"The market is relieved the Fed will keep rates low for anextended period of time," said Cary Leahey, economist atDecision Economics in New York. "The market had been afraidthat the Fed might be close to hiking policy rates."
MSCI"s index of world stocks .MIWD00000PUS gained about0.2 percent.
The euro EUR= rose as high as $1.3626 at one point andlast traded at $1.3570, up about 0.45 percent.
Shortly after midday, the Dow Jones industrial average.DJI was up 84.95 points, or 0.83 percent, at 10,367.36. TheStandard Poor"s 500 Index .SPX was up 9.02 points, or 0.82percent, at 1,103.62. The Nasdaq Composite Index .IXIC was up22.87 points, or 1.03 percent, at 2,236.31.
Sectors that were worst hit by Tuesday"s sell-off reboundedto lead the way up, including financials and technology.
European shares also eked out gains on Bernanke"s comments.The FTSEurofirst 300 .FTEU3 pan-European index of top sharesclosed up 0.2 percent to 1,013.66 points. Banks gained amidwhat is proving to be a generally positive reporting season forthe sector.
"People are still nervous about financials, and the Greekand European solution," said Colin McLean, managing director atScottish Value Management in Edinburgh. "And some of theresources shares may have peaked. And the key characteristic inthe market is low volumes."
Investors had taken a wait-and-see approach this weekbefore Bernanke started his semiannual testimony on monetarypolicy and the state of the economy before the U.S. HouseFinancial Services Committee.
Bernanke said a weak job market and low inflation arelikely to warrant exceptionally low levels of the key federalfunds rate for an extended period of time. [ID:nN23153536]
Bernanke told lawmakers that he stood prepared to continuesupporting the economy with extraordinary stimulus for sometime, but also argued the Fed possesses a broad array of toolsto remove such accommodation when the time is right.
"The Fed is trying to back away from its liquidity measuresand to reduce its balance sheet somewhat, but the Fed is goingkeep rates low for an extended period," said John Canally,investment strategist at LPL Financial in Boston.
"By keeping that language, that"s what helping the marketsfrom the new home sales number," Canally said.
The Commerce Department reported that sales of newly builtU.S. single-family dropped to a record low in January,suggesting potential trouble for the fragile housing marketrecovery [ID:nN24373288]. Wall Street had trimmed early gainson the data, and the dollar fell against the yen and euro.
U.S. Treasuries also erased modest losses.
New U.S. home sales dropped 11.2 percent to a 309,000 unitannual rate in January, the lowest level since records startedin January 1963.
Benchmark 10-year Treasury notes US10YT=RR, which weredown 3/32 just before the new home sales report and Bernanke"stestimony, were up 3/32 to yield 3.68 percent.
Oil bounced over $1 to over $80 as comments from Bernankekept hopes for low interest rates to spur the economy and hurtthe dollar.
U.S. crude for April CLc1 was up 93 cents to $79.79.London ICE Brent LCOc1 was up 75 cents at $78.00. U.S. crudetouched a high of $80.13 while Brent reached $78.42.
Gold fell as the dollar weakened against the euro.
Spot gold prices XAU= fell $3.60 to $1,098 an ounce. (Reporting by Luciana Lopez, Ellen Freilich in New York;George Matlock, Jo Winterbottom, Ian Chua and Harpreet Bhal inLondon; writing by Herbert Lash; Editing by Leslie Adler)
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