* S&P 500 gains over 1 pct after five days of losses
* Top European share index notches best gain in 5-1/2 months
* U.S., European financial shares rally
* 10-yr Treasury yields rise from lowest since Aug. 2012
* Oil prices rally; U.S. crude off over 12-year lows (Updates to close of European markets)
By Sam Forgione
NEW YORK, Feb 12 (Reuters) - U.S. and European shares rebounded from recent weakness on Friday, with reassuring U.S. retail sales data boosting sentiment, while U.S. crude prices rallied from more than 12-year lows.
Banking shares in the United States and Europe spiked, with the S&P financial index last up 3.4 percent and the STOXX 600 Europe Banks index gaining 5.6 percent.
The U.S. S&P 500 gained over 1 percent after five days of losses that had dropped it to its lowest level in two years on Thursday. In Europe, advances in shares of Deutsche Bank and its rival Commerzbank of 11.8 percent and 18 percent, respectively, helped European stocks rebound.
The FTSEurofirst 300 index of top European shares notched its biggest daily gain in five and a half months after hitting a two-and-a-half-year low on Thursday. The index was up 3.04 percent at 1,232.09.
The S&P financial index has fallen about 15 percent this year, and the European bank index nearly 25 percent, as worries over the impact of central banks’ negative interest rate policies on banks’ profitability intensified in recent days.
Commerce Department data showing U.S. retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent in January also boosted optimism.
‘OVERWHELMING’ CHANCE OF RECESSION
“The market has gone from very little chance of recession to pricing in an overwhelming chance of recession despite the data not supporting that,” said Michael Jones, chief investment officer of RiverFront Investment Group in Richmond, Virginia.
“The more numbers you get like retail sales ... the more this market can whipsaw people by heading right back up.”
An overnight drop in Asia shares limited gains in MSCI’s all-country world equity index. The index rose 2.61 points, or 0.74 percent, to 355.96.
On Thursday, it had closed more than 20 percent below its all-time high, confirming a bear market in global equity prices. Mainland China markets reopen on Monday after the Lunar New Year holiday.
On Wall Street, the Dow Jones industrial average was last up 226.72 points, or 1.45 percent, at 15,886.9. The S&P 500 was up 25.1 points, or 1.37 percent, at 1,854.18. The Nasdaq Composite was up 43.12 points, or 1.01 percent, at 4,309.96.
The S&P energy index was last up 1.7 percent. U.S. crude oil jumped as much as 13 percent on prospects for a coordinated production cut sparked by comments from the energy minister of OPEC member United Arab Emirates.
U.S. crude was last up 12 percent at $29.38 per barrel after hitting $26.05 a barrel on Thursday, the lowest in more than 12 years. Brent crude was last up nearly 10 percent at $33.03 a barrel.
Safe-haven 10-year Treasury notes were last down 30/32 in price to yield 1.75 percent after hitting 1.53 percent Thursday, their lowest yield since Aug. 2012.
The dollar rose after the U.S. retail sales data. The dollar index, which measures the greenback against a basket of six rivals, was last up 0.5 percent.
Spot gold was down $8.75 to $1,237.76 an ounce but was still set for its best week in four years.
Additional reporting by Dion Rabouin and Tariro Mzezewa in New York, Libby George in London and Aastha Agnihotri in Bengaluru; Editing by Nick Zieminski and Bernadette Baum