* U.S. dollar hits lowest level vs euro since Oct
* Wall St down after weak services data but off lows
* European shares hurt by weak earnings
* Oil bounces 5 pct after U.S. data sparks short-covering
* 10-year Treasury yields fall to 1-year low
(Updates with opening of U.S. markets; pvs dateline London)
By Lewis Krauskopf
NEW YORK, Feb 3 (Reuters) - U.S. and European stocks came
off their lows on Wednesday, helped by rebounding oil prices,
while a soft report on the U.S. services sector weighed on the
dollar by making future rate hikes appear less likely.
The U.S. dollar hit its lowest level against the euro since
October and wiped out recent gains against the yen. A top
Federal Reserve official said the weakening outlook for the
global economy and any further strengthening of the dollar could
have "significant consequences" for the U.S. economy.
The U.S. economy's service sector expanded in January at a
slower pace than the previous month, according to the Institute
for Supply Management. Investors had been encouraged earlier in
the session by data from a payrolls processor that found U.S.
private employers added 205,000 jobs in January, above
economists' expectations.
"There is ongoing concern reflected in the market today, and
maybe yesterday, about the slowdown in the manufacturing sector
spreading to the consumer side of the economy," said Jim
Paulsen, chief investment officer at Wells Capital Management in
Minneapolis.
The Dow Jones industrial average .DJI rose 25.2 points, or
0.16 percent, to 16,178.74, the S&P 500 .SPX lost 5.91 points,
or 0.31 percent, to 1,897.12 and the Nasdaq Composite .IXIC
dropped 34.63 points, or 0.77 percent, to 4,482.32.
European shares fell as weak earnings from some leading
companies weighed.
The pan-European FTSEurofirst 300 index .FTEU3 fell 2.1
percent, amid disappointing earnings from Finnish
state-controlled utility Fortum FUM1V.HE and Dutch telecoms
group KPN KPN.AS .
Data showed euro zone businesses had a disappointing start
to 2016, with growth in January matching the worst seen last
year.
MSCI's 46-country All World share index .MIWD00000PUS fell
1 percent.
Equities have been tightly correlated to oil in recent weeks
as the commodity's 1-1/2-year slide has deepened, with investors
worried that oil's slide is a sign of shakiness in the global
economy.
Oil rose after investors took advantage of a drop in the
U.S. dollar and earlier weakness in the crude price, despite
weekly data showing a surprisingly large rise in U.S. inventory.
Russia also repeated its willingness to take part in talks with
OPEC producers to cut output.
U.S. crude CLc1 gained 5.2 percent to $31.42 a barrel,
while benchmark Brent crude LCOc1 gained 5 percent to $34.37 a
barrel.
Financial conditions have tightened considerably since the
Fed raised interest rates and monetary policymakers will have to
take that into consideration should that phenomenon persist,
William Dudley, president of the Federal Reserve Bank of New
York, told MNI in an interview.
Dudley's comments, combined with the ISM data, raised
skepticism about the Fed's ability to further raise rates,
weighing on the dollar.
The greenback .DXY fell 1.3 percent against a basket of
currencies, while the euro EUR= gained 1.2 percent against the
dollar.
"Fed rate forecasts are coming under fire," said Joe
Manimbo, senior market analyst at Western Union Business
Solutions in Washington, in reference to Fed policymakers'
December forecast of four rate hikes this year.
U.S. Treasury yields fell to a one-year low after the ISM
services data.
Benchmark 10-year note yields US10YT=RR were last up 16/32
prices to yield 1.8104 percent, from 1.83 percent overnight. At
one point, yields fell below technical resistance to a low of
1.7930 percent, the lowest since February 5, 2015.