GLOBAL MARKETS-Stocks rebound, oil surges on U.S. energy data

* Oil rises toward $72 on signs of U.S. demand recovery

* Market unease over China lifts yen, but euro resilient

* Debt prices climb as investors go for lower risk assets

* China losses shake fragile economic confidence (Updates with U.S. markets activity, changes dateline; previous LONDON)

By Herbert Lash

NEW YORK, Aug 19 (Reuters) - U.S. stocks rebounded and oil jumped to almost $72 a barrel on Wednesday after data suggested a recovery in U.S. oil demand, a surprise for investors who had been fretting over a sharp slide in Chinese equities.

A U.S. government inventory report showed a huge drop in crude supplies last week, which boosted oil futures more than 4 percent at one point and lifted Wall Street sentiment that had turned dour after a 4.3 percent a drop in the Shanghai Composite Index <.SSEC>.

The drop took losses on the key Chinese index to 20 percent over the past two weeks, a plunge hard for investors to ignore considering China's role in any global recovery.

Copper fell to its lowest level in just over two weeks, and government debt prices in Europe and the United States rose as investors sought havens in less risky assets.

But oil reversed early losses after the U.S. Energy Information Administration (EIA) said crude stocks fell by 8.4 million barrels last week, confounding analyst expectations for a rise of 1.3 million barrels. [EIA/S]

"I think these (demand) changes are reflective of an improving economy, but one must be cautious because these changes are versus year-ago weak numbers," said API chief economist John Felmy.

The news lifted U.S. stocks that had been down about 1 percent. The S&P Energy index <.GSPE> gained almost 2 percent, making it the top sector performer. Exxon Mobil and Chevron also rose about 2 percent each.

"Oil is helping us," said Rick Meckler, president of LibertyView Capital Management in New York. "It's a big part of the index and energy companies have helped turn this market before."

After 1 p.m., the Dow Jones industrial average <.DJI> rose 71.34 points, or 0.8 percent, to 9,289.28. The Standard & Poor's 500 Index <.SPX> added 7.78 points, or 0.8 percent, to 997.45. The Nasdaq Composite Index <.IXIC> gained 13.12 points, or 0.7 percent, to 1,969.50.

European equities ended lower after a choppy session, with weaker financial and automobile stocks outpacing a rise in oil and gas shares. But oil producers helped Britain's leading share index to end slightly higher.

The FTSEurofirst 300 <.FTEU3> index of top European shares closed 0.3 percent lower at 931.98 points.

The dollar fell against the yen after China's stock market slide raised concerns about the strength of a global recovery while boosting the Japanese currency's safe-haven appeal.

But the recovery in U.S. equities helped higher risk currencies recover losses, and the euro pushed above $1.42 and was on track for its biggest daily rise against the dollar in more than two weeks.

The spike in oil prices also helped higher-risk assets and currencies recover losses sparked by China's stock market.

"Negative sentiment hasn't disappeared but it has abated, with both the S&P <.SPX> and Dow <.DJI> paring losses," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. "That gave the market a chance to push the euro higher."

The dollar hit a one-month low against the yen and was last down 0.9 percent at 93.83 yen . The euro was unchanged at 133.83 yen , well above a one-month low of 132.16.

September Bund futures settled up 50 ticks at 122.67.

The benchmark 10-year U.S. note , meanwhile, recently traded 9/32 higher in price to yield 3.49 percent.

The MSCI index <.MIAPJ0000PUS> of Asia Pacific stocks outside Japan slipped 0.3 percent, while Japan's Nikkei share average <.N225> finished 0.8 percent lower. (Reporting by Stephen C. Johnson, Chris Reese in New York; David Sheppard, Dominic Lau, Atul Prakash, George Matlock and Jan Harvey in London; writing by Herbert Lash; Editing by Leslie Adler)