Oil retreats after Monday's rally; stocks climb

NEW YORK (Reuters) - Oil prices resumed their decline on Tuesday after rallying the previous session, while world stock markets edged higher as investors snapped up beaten-down energy shares.

A bounce in oil prices on Monday from five-year lows helped foster a broadly more positive tone in Asia, but both Brent and U.S. crude oil were down more than 1 percent in midday U.S. trading on Tuesday. Brent crude oil is down more than 30 percent since June.

U.S. stocks were higher, led by gains in energy as investors picked up shares in the sector after heavy recent losses. The S&P energy index <.SPNY>, which has fallen sharply with oil prices and is down about 14 percent since June, rose 1.4 percent.

"Valuations have gotten pummeled under the weight of declining crude prices, and it looks like investors are starting to nibble at the space," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The Dow Jones industrial average <.DJI> rose 52.68 points, or 0.3 percent, to 17,829.48, the S&P 500 <.SPX> gained 8.04 points, or 0.39 percent, to 2,061.48 and the Nasdaq Composite <.IXIC> added 16.49 points, or 0.35 percent, to 4,743.84.

MSCI's global share index <.MIWD00000PUS> was up 0.2 percent. European shares <.FTEU3> ended up 0.5 percent. Emerging market shares tracked by MSCI <.MSCIEF> were down 0.1 percent, with Brazil's Bovespa index <.BVSP> down 0.3 percent.

Other gainers in the stock market included shares of Biogen Idec , which jumped 7.2 percent after favorable data from the Phase III trial of its Alzheimer's drug. The NASDAQ biotech index <.NBI> was up 1.5 percent.

In the energy market, Brent crude was last down 99 cents at $71.55 a barrel, while U.S. crude oil was down $1.12 at $67.88.

Beyond the plunge in oil is a deeper debate about whether some developed economies are slipping into a prolonged period of stagnation, or just coming out of the financial crises of the past five years more slowly than previously hoped.

IMF Managing Director Christine Lagarde said late on Monday that cheaper oil was a positive for the global economy. The drop has given a boost to travel companies and should have a positive impact on consumer spending.

DOLLAR GAINS

The dollar rose to a 4 1/2-year high, supported by a retreat in oil prices that has helped to lift it against commodity-linked currencies.

Comments from two Federal Reserve officials who stressed the positive impact on the U.S. economy from a decline in oil prices helped to boost the greenback. The dollar index <.DXY> was up 0.8 percent at 88.603.

Gold slipped following gains in the dollar. Spot gold dipped 0.8 percent to $1,200.40 an ounce.

U.S. Treasuries prices fell, pressured by institutional investors readying for a big corporate bond deal by leading retailer Amazon . The 10-year Treasury note was last off 17/32 to yield 2.2782 percent.

(Additional reporting by Patrick Graham in London and Ryan Vlastelica and Daniel Bases in New York; Editing by Catherine Evans, Dan Grebler and Andre Grenon)

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