* Low ECB loan repayment pushes euro to 6-week low * U.S., European shares, commodities rebound after sharp losses * Italian elections in focus * HP lifts Wall St but S&P set for first down week of year By Angela Moon NEW YORK, Feb 22 (Reuters) - Global equity markets rebounded on Friday, recovering some of the previous session's sharp losses, but the euro hit a six-week low against the dollar on renewed doubts about the health of the euro zone's financial system. Oil prices edged up as evidence of improving business morale in Germany helped bolster sentiment after two days of heavy losses. U.S. stocks also rose, rebounding from two days of losses as shares of Dow component Hewlett-Packard surged on strong results. The stock jumped 14 percent to $19.52 and was the top gainer on both the Dow and the S&P 500 indexes. Risk-associated assets have been rattled this week by suggestions the U.S. Federal Reserve could scale back its monetary support sooner than expected and by weak euro zone data that dashed hopes of an early recovery in the recession-hit region. The S&P 500 had dropped 1.9 percent over the prior two sessions, its worst two-day drop since early November, putting the benchmark on pace for its first weekly decline of the year. Still, the index is up about 6 percent for the year and managed to hold the 1,500 support level. In a sign that some euro zone banks may still need support, the ECB said just over 61 billion euros ($81 billion) of the 530 billion it lent at the height of the bloc's crisis last year will be repaid when banks get the first opportunity next week. That was well below the 130 billion euros expected by traders and means there remains more than enough cash in the banking system to keep downward pressure on money market rates. The news sent the euro to a six-week low against the dollar. "The smaller-than-expected payback of loans means the ECB's balance sheet will shrink at a slower-than-expected pace," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. It "further undermined confidence in the state of recovery in the 17-member bloc." The data signaled that some banks still feel the need to keep hold of the ultra-cheap emergency loans and means the ECB's balance sheet will shrink at a slower pace. A report from the European Commission that forecast the euro zone economy will contract again in 2013, and caution ahead of an Italian election this weekend, also weighed on the euro, which fell for a third straight session. But stocks fared better in Europe as investors looked to take advantage of the previous session's sharp sell-off, though traders cited some caution given the elections in Italy. The FTSEurofirst 300 closed up 1.2 percent at 1,165.43, having sunk 1.5 percent on Thursday. The Dow Jones industrial average was up 100.45 points, or 0.72 percent, at 13,981.07. The Standard & Poor's 500 Index was up 10.51 points, or 0.70 percent, at 1,512.93. The Nasdaq Composite Index was up 23.87 points, or 0.76 percent, at 3,155.36. MSCI's world share index was up 0.5 percent. EURO HITS 6-WEEK LOW The euro fell as low as $1.3144, its lowest since Jan. 10, retreating from a session high of $1.3244 after the German Ifo survey showed a big jump in business morale in Germany, suggesting a brighter outlook for the euro zone's largest economy. The euro was last down 0.2 percent at $1.3167, with market players reporting supporting bids around $1.3150-60. Europe's common currency was on track for third straight week of losses. Investors were wary about the risk of a fragmented Italian parliament, which could hinder the euro zone's third-largest economy from fighting its longest recession in 20 years. Market participants in general are taking a more defensive position - betting on the euro's downside - in case of an adverse outcome in Italy. The result of the vote is not expected until next week. The euro and the dollar rose against the yen, although strategists said the Japanese currency's three-month decline was showing signs of losing momentum. Expectations the new Japanese government will take aggressive easing steps to revive the economy have helped the yen fall steeply across the board since November. Against the yen, the euro rose 0.2 percent to 123.10 yen . The dollar rose 0.3 percent to 93.39 yen, not far from a 33-month high of 94.47 hit last week. Like equities, commodities rebounded from Thursday's big sell-off, which was driven by fears that the Fed may be edging closer to ending its ultra-loose monetary policy, which has flooded the markets with liquidity. Brent April crude rose 57 cents to settle at $114.10 a barrel, while U.S. April crude added 29 cents to settle at $93.13 a barrel. In U.S. Treasuries trading, the benchmark 10-year U.S. Treasury note was up 2/32, the yield at 1.9653 percent.