* 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.
“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 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 were last up $1.95, or 6.39 percent, at $32.45 a barrel and U.S. crude 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 was up 275.27 points, or 1.73 percent, to 16,160.49, the S&P 500 was up 26.6 points, or 1.42 percent, to 1,903.68 and the Nasdaq Composite was 55.58 points, or 1.23 percent, higher at 4,574.07.
Some nervousness ahead of Apple’s 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 closed up 0.9 percent at 1,335.90.
Tokyo’s Nikkei ended 2.4-percent weaker, part of a broad decline across Asia.
Mainland Chinese shares 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 and down 0.2 percent versus the euro at 128.54 yen.
The dollar was weaker against a basket of currencies, last down 0.2 percent at 99.161.
Nagging worries about falling oil prices and the global economy underpinned demand for U.S. and German government bonds.
Benchmark 10-year Treasury yield dipped 2 basis points to 2.005 percent. The 10-year Bund yield declined 3 basis points to 0.443 percent. .
Spot gold prices rose for a second day. It was last rose $13.15 or 1.19 percent, to $1,120.81 an ounce. (Additional reporting by Abhiram Nanadakumar in Bengaluru,; Marc Jones, Anirban Nag in London, Hideyuki Sano in Tokyo, Meeyoung Cho in Seoul; Editing by Louise Ireland and Nick Zieminski)