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Global stocks soar on U.S. plan

19/09/2008 - 15:51

By Herbert Lash

NEW YORK (Reuters) - The U.S. dollar and global stocksrallied on Friday as news of a sweeping U.S. government plan tohalt widespread turmoil in capital markets bolstered investorconfidence and sent safe-haven bets sharply lower.

The rally, spurred by a surge in financial stocks, added togains on Thursday, the best day on Wall Street in six years.

Leading European shares surged more than 7 percent, theFTSE 100 index soared more than 8 percent and MSCI's leadingemerging market index jumped almost 10 percent.

Battered banking shares led the charge. Goldman Sachsgained 18 percent, Citigroup jumped 20 percent, Merrill Lynchrose 23 percent, Bank of America gained 18 percent and Wachoviasoared 27 percent, although they had all gained considerablymore at the open.

"What authorities are trying to do is just buy enough timefor the market to settle down and for the details of thePaulson plan to be understood, how long it would take toimplement and what it means for the banks," said PaulMendelsohn, chief investment strategist at Windham FinancialServices in Charlotte, Vermont, referring to U.S. TreasurySecretary Henry Paulson.

Paulson on Friday called for the U.S. government to spendhundreds of billions of dollars to take toxic mortgage assetsoff the books of financial firms to restore financialstability.

In early morning trade, the Dow Jones industrial averagewas up 324.38 points, or 2.94 percent, at 11,344.07. TheStandard & Poor's 500 Index was up 38.30 points, or 3.17percent, at 1,244.81. The Nasdaq Composite Index was up 58.44points, or 2.66 percent, at 2,257.54.

The yen tumbled to a 10-day low against the dollar, whichrose more than 3 percent versus the Japanese currency, and theeuro gained against the yen as the appetite for risk returned.

The dollar slipped against major currencies, with the U.S.Dollar Index down 0.05 percent at 78.17. Against the yen, thedollar was up 3.22 percent at 107.68.

The euro rose 0.52 percent at $1.4377.

The price of benchmark U.S. and euro zone government debtdived as investors unwound safe-haven bets. The price of30-year U.S. Treasury debt fell more than 3 points andbenchmark 10-year Treasury notes fell 2 full points.

The 10-year U.S. Treasury note fell 53/32 to yield 3.76percent and the 30-year U.S. Treasury bond fell 89/32 to yield4.37 percent.

Oil rose more than $4 to above $102 a barrel onexpectations the U.S. government's plan would ease batteredfinancial markets. U.S. light sweet crude oil rose $4.54 to$102.42 a barrel.

U.S. authorities tinkered with last-minute details to plansto offload hundreds of billions of dollars of bad debt frombanks' balance sheets to ease investor fears that had clamped astranglehold on the global financial system in recent weeks.

U.S. securities regulators joined regulators from othercountries early Friday in temporarily banning short sales offinancial shares. In addition, the U.S. Treasury said it willestablish a program to guarantee money market fund holdings.

Spot gold prices rose $3.40 to $866.10 an ounce.

(Reporting by Ellis Mnyandu, Steven C. Johnson, John Parry,Lucia Mutikani and Gertrude Chavez-Dreyfuss in New York andMatthew Robinson and Atul Prakash in London; Writing by HerbertLash; Editing by James Dalgleish)


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