* Housing starts fall, industrial output rises

  * Home Depot, Wal-Mart rise on upbeat reports

  * Fitch affirms U.S. 'AAA' rating with stable outlook

  * Indexes off: Dow 0.2 pct, S& P 0.4 pct, Nasdaq 0.7 pct (Updates to late morning, adds quote, changes byline)

  By Caroline Valetkevitch

  NEW YORK, Aug 16 (Reuters) - U.S. stocks fell on Tuesday after three days of gains as weak German growth data renewed concerns about the euro zone debt crisis and the global economy.

  The Dow average got some support after two components, Wal-Mart and Home Depot, rose on upbeat quarterly reports.

  Worries about the euro zone troubles and a weakening U.S. economy have pushed U.S. stocks into correction territory after the S& P 500's closing high on April 29.

  " I think there was still a little hope out there that Germany could remain strong and help prop up the European Union, but now it looks like Germany is going to have think about itself," said Bryant Evans, portfolio manager at Cozad Asset Management in Champaign, Illinois.

  Investors awaited comments from a joint news conference with German Chancellor Angela Merkel and French President Nicolas Sarkozy, coming after they met to discuss measures to contain Europe's fiscal crisis. The news conference was set for noon EDT (1600 GMT).

  Sluggish growth in Germany hobbled the euro zone economy, raising fears of a longer-term dip that could derail efforts to resolve the bloc's debt crisis.

  Helping to limit losses, Fitch affirmed the U.S. credit rating with a stable outlook, in contrast to Standard & Poor's, which downgraded its top-tier credit rating on Aug. 5.

  " The greatest concern for investors on sovereign debt issues related to the United States would be higher interest rates, and we're not seeing any of that," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

  The Dow Jones industrial average was down 27.70 points, or 0.24 percent, at 11,455.20. The Standard & Poor's 500 Index was down 4.90 points, or 0.41 percent, at 1,199.59. The Nasdaq Composite Index was down 17.51 points, or 0.69 percent, at 2,537.69.

  Financials, seen as vulnerable to a European fiscal crisis, led the day's declines on the broad S& P 500. The S& P financial index was down 0.8 percent.

  Stocks rose for the last three sessions, nearly wiping out last week's losses, but the S& P 500 is still down about 5 percent since the start of the year.

  Stocks saw a massive selloff on the Monday following the S& P downgrade, with the S& P 500 dropping 6 percent in that session.

  Wal-Mart Stores gave the biggest boost to the Dow, rising 3.9 percent to $51.92 after its profit beat expectations.

  Home Depot Inc rose 5 percent to $33.01 after its profit came in better than expected, and the home improvement retailer operator raised its earnings forecast for the year.

  In the latest U.S. data, industrial output rose at its fastest pace in seven months in July, while July housing starts fell, reflecting a sector continuing to bounce along the bottom.

BERLIN, Aug 16 (Reuters) - Germany and Liechtenstein have agreed a deal to prevent tax evasion and double taxation, the German finance ministry said on Tuesday.

  The ministry said the deal should be signed this year. The two countries still needed to clarify, in a separate agreement, what would happen with German assets held in the tiny principality that had not been taxed until now.

  Germany and Switzerland last week agreed to tax money stashed by German citizens in secret accounts, in a deal that will net Berlin billions of francs.

  It remains unclear whether Germany will reach a similar agreement with Liechtenstein.

(Adds details, analyst quote, market reaction)

  By Burton Frierson

  NEW YORK, Aug 16 (Reuters) - Fitch Ratings said on Tuesday it affirmed the United States' top-notch credit rating at AAA, giving the world's largest economy a reprieve after it was downgraded by Standard & Poor's little more than a week ago.

  Fitch said the outlook for the rating was stable.

  However, it warned that the United States was falling behind its peers among the AAA-rated nations on fiscal matters and the country had to show tangible results in its efforts to reduce the budget deficit.

  It said it would review its fiscal projections at the end of November and medium-term economic outlook by the end of the year.

  " The affirmation of the US 'AAA' sovereign rating reflects the fact that the key pillars of US's exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base," Fitch said in its statement.

  " Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks'."

  Financial markets showed little reaction to the news, which also coincided with the release of industrial output data.

  U.S. government bonds pared some price gains slightly and the dollar edged up to the day's highs against the yen.

  However, Fitch warned the outlook for the rating depended on the economy and the ability of the political process in Washington to reduce the public debt.

  " S& P had a very specific basis for their concern which was that there was no long-run plan for budget control," said Pierre Ellis, senior economist, Decision Economics, New York.

  " Fitch certainly is correct with respect to the breadth of the United States' potential revenue sources...it is putting a little more faith in the common sense of Congress and the Administration with respect to getting the budget situation under control."

  Fitch said an upward revision to medium- to long-term projections for public debt either as a result of weaker than expected economic recovery or failure of the joint committee to agree on at least $1.2 trillion in deficit reduction would likely put the United States on negative outlook.

  " The rating action would most likely be a revision of the rating Outlook to Negative, which would indicate a greater than 50 percent chance of a downgrade over a two-year horizon. Less likely would be a one-notch downgrade," the statement said.

* Weaker dollar, stronger equities support commodity gains

  * Concern over faltering U.S., European economic growth

  * Investors awaiting detail on euro zone debt talks

  * Coming Up: Euro zone Q2 GDP on Tuesday at 0900 GMT (Updates detail, prices)

  By Christopher Johnson

  LONDON, Aug 15 (Reuters) - Oil prices rose more than $1 per barrel on Monday as economic data helped ease concerns over a looming recession despite worries over the euro zone debt crisis and outlook for global growth.

  Stock markets rallied and safe-haven assets such as gold, the dollar and the Swiss franc all fell after last's week's wild swings.

  But analysts were cautious over the state of global oil demand and awaited first indications from the euro zone on second-quarter economic growth due on Tuesday at 0900 GMT.

  Euro zone industrial output posted a surprise decline in June, boding poorly for second-quarter gross domestic product, which is forecast to have expanded by just 0.3 percent compared with the first quarter.

  German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Paris on Tuesday to hammer out a solution to the debt crisis which threatens to engulf the economies of Italy and Spain and has heightened strains in money markets to levels not seen during the 2008 crisis.

  North Sea Brent crude oil futures < LCOc1> for September rose $1.32 to $109.35 by 1403 GMT, after dipping earlier to $107.40. U.S. crude < CLc1> was up $1.69 at $87.07 a barrel.

  Both crude oil benchmarks recorded their third straight weekly loss in volatile trading last week, as a downgrade of U.S. credit worthiness by ratings agency Standard & Poor's and fears that France might suffer the same fate sparked selling.

  " It is much too early to call this a bottom to the market," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

  " But losses have been so substantial, even with the recovery last week, that I wouldn't be surprised if we saw some recovery in the short-term. It will be very difficult to surprise the market to the downside," Weinberg added.

  While weak data out of the United States or Europe this week could send markets down again, the bar for disappointment has been set higher after last week's turmoil.

  Ben Westmore, commodities analyst at National Australia Bank, said a lot of bad news had already been priced in and there was some expectation weakness would not be sustained:

  " At these levels, oil looks cheap and we could see some buying activity," Westmore said.

  Investors were heartened by several sets of data suggesting the developed economies may not be slowing as much as feared.

  U.S. retail sales on Friday posted their biggest gains in three months in July, although this was partly overshadowed by a slump in consumer confidence.

  The Japanese economy shrank much less than expected in the second quarter as companies made strides in restoring output after the earthquake in March.

 

  RECESSION WORRIES

  In the longer-term, economists worry that as a U.S. economic rebound stalls and threatens to spiral into recession, oil demand in the world's top consumer may be slipping into an irreversible decline.

 

 

  Brent is expected to retrace to $104.43 per barrel as the rebound that started from the Aug. 9 low of $98.74 is ending, while U.S. crude could fall back to $81 per barrel as it faces a strong resistance at $86.79 per barrel, Reuters technical analyst Wang Tao said.

  Renewed fears of further supply disruptions in the oil-producing region of North Africa and the Middle-East also supported prices.

  Muammar Gaddafi urged Libyans on Monday to free the country from " NATO and traitors" , as rebels in the west began to strangle a major lifeline to his capital.

  In Syria, government forces shelled residential districts in Latakia, residents said, the third day of an assault on Sunni neighbourhoods of the port city which had seen mounting protests against President Bashar al-Assad's rule. (Additional reporting by Francis Kan in Singapore editing by Anthony Barker)

* Wall St. up, bucking weak New York manufacturing index

  * Bargain hunting aids rebound after supportive Japan GDP

  * Google bid for Motorola Mobility adds to investor fervor

  * Oil prices up nearly 2 pct as risk appetite widens (Recasts and updates throughout with Wall Street's open changes dateline, previously LONDON)

  By Barani Krishnan

  NEW YORK, Aug 15 (Reuters) - Wall Street opened higher on Monday, defying an unexpected drop in New York state's key manufacturing index, as investors made a beeline for assets cheapened by last week's rout, including commodities.

  World stocks climbed further out of their August hole, after Japan's economy shrank less than anticipated in the second quarter after companies made strides in restoring output following a devastating earthquake and tsunami.

  " The Japanese news, while not overly encouraging, was another datapoint showing things are not nearly as bad as the selloff seemed to suggest," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

  " This is an extremely jittery market, just looking to avoid significant bad news," he said. " I would expect there to be less volatility than we saw last week."

  U.S. stocks opened higher with the Dow Jones industrial average < .DJI> up 108.53 points, or 0.96 percent, at 11,377.55. The Standard & Poor's 500 Index < .SPX> was up 10.77 points, or 0.91 percent, at 1,189.58. The Nasdaq Composite Index < .IXIC> was up 17.36 points, or 0.69 percent, at 2,525.34.

  The S& P 500 hit near a one-year low last week as markets tumbled initially on the first-ever U.S. credit ratings downgrade and fears that Europe's debt woes may get out of hand, before rebounding with almost equal force on the notion the selloff was overdone.

  Monday's rebound was fueled partly by news that Google Inc < GOOG.O> had offered to buy Motorola Mobility Holdings Inc < MMI.N> for about $12.5 billion in cash. Google was down almost 2 percent while Motorola Mobility jumped nearly 60 percent. [ID:nN16266170]

  MSCI's all-country world stock index < .MIWD00000PUS> , a broad measure of global equity health, was up 1.5 percent, ratcheting up a 7 percent gain since hitting an 11-month low on Thursday. European stocks < .MSCIEF> rose 2 percent.

  In the United States, a gauge of manufacturing in New York State showed the sector contracted for the third month in a row in August as new orders fell to their lowest level since November 2010, the New York Federal Reserve said in a report.

  Separate data from the U.S. Treasury Department showed foreigners unloaded U.S. assets in June for a second straight month and were net sellers of Treasury securities for the first time in more than two years as concern about a U.S. credit downgrade soured overseas demand. [ID:nN1E77E0BT]

  Among commodities, U.S. crude oil rose up to 2 percent, touching a session peak of nearly $87 per barrel, after trailing equity markets higher.

  The dollar's drop against the euro < EUR=EBS> , to a one week low of $1.42550, lent further support to commodities.

  On the euro zone crisis front, Italian economy minister Giulio Tremonti's call for common euro zone debt issuance was rejected by German Finance Minister Wolfgang Schaeuble, who said such euro bonds would undermine the basis for the single currency by weakening fiscal discipline among member states. [ID:nL6E7JD02L]

  German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to meet in Paris on Tuesday to discuss the crisis. Germany said not to expect any breakthrough agreement France said euro bonds were not on the agenda.

  U.S. and core euro zone debt yields were flat.