* Stocks rise on optimism over bank, stimulus plans
* Crude oil advances slightly as U.S. crude stocks rise
* Bonds rebound from last week's fall as Fed meeting looms
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Jan 28 (Reuters) - Optimism over proposed
government spending plans and efforts by the new U.S.
administration to quickly help ailing banks lifted global
stocks on Wednesday and helped firm crude oil prices.
Bank shares advanced on both sides of the Atlantic on hope
to create a U.S. "bad bank" as a solution to mop up toxic
assets, giving many banks double digits gains. For details, see
[].
Spain's Santander <SAN.MC>, Europe's largest bank, and
Wells Fargo <WFC.N>, one of the biggest U.S. banks, both said
they would maintain their dividend, giving investors who have
been hit hard by the financial crisis something to cheer.
A U.S. Senate move on Tuesday to widen a proposed stimulus
package to about $887 billion also boosted confidence in equity
markets but blunted the appeal of the safe-haven dollar and
yen.
U.S. and euro zone government bond prices rose, depressing
yields, as dealers adjusted positions before a Federal Reserve
statement expected later Wednesday that the U.S. central bank
may start buying Treasuries.
Announcements from Tokyo to Washington to London on further
government fiscal stimulus measures to revive the flow of
credit and economic activity helped lift some of the gloom.
Oil firmed a bit after a U.S. government report showed U.S.
gasoline inventories declined and as equities rallied on
positive sentiment about the economy.
Banks were the stars of the day, with many rising by
double-digit percentage gains. Lloyds <LLOY.L> shot up 50
percent, Royal Bank of Scotland <RBS.L> soared 36 percent and
Deutsche Bank <DBKGn.DE> climbed 22 percent in Europe.
Among U.S. banks, State Street Corp <STT.N> jumped 30
percent and Wells Fargo added 25 percent.
"We are very optimistic about that news," Jim King, chief
investment officer at National Penn Investors Trust Co in
Reading, Pennsylvania, said about the "bad bank."
"We felt this has been the missing component to allow the
markets to recover," he said. "Until the banking component of
the crisis is dealt with there will continue to be this cloud
of anxiety and concern overhanging the markets."
About 1 p.m., the Dow Jones industrial average <> was
up 118.92 points, or 1.45 percent, at 8,293.65. The Standard &
Poor's 500 Index <.SPX> was up 20.47 points, or 2.42 percent,
at 866.18. The Nasdaq Composite Index <> was up 44.36
points, or 2.95 percent, at 1,549.26.
Banks were the biggest contributor to a third straight day
of gains for European shares, with HSBC, Santander, BNP
Paribas, Lloyds Banking Group and UBS AG the top advancers.
The FTSEurofirst 300 <> index of top European shares
closed 3.2 percent higher at 810.82 points, but is still down
2.6 percent this year.
Lloyds spiked after Citigroup analyst Tom Rayner upgraded
his rating to "buy" and said a full nationalization would be
"unnecessary and inconsistent" with the government's aim.
Investors turned to the Fed. With interest rates already
targeted near zero, markets were on alert for word of new
policies, such as buying long-dated U.S. government bonds.
"My sense is that the U.S. administration is not of the
opinion that the Fed is out of ammo," said David Gilmore,
partner at Foreign Exchange Analytics in Essex, Connecticut.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
8/32 in price to yield 2.56 percent. The 30-year U.S. Treasury
bond <US30YT=RR> added 30/32 in price to yield 3.25 percent.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.54 percent at 83.945.
But against the yen, the dollar <JPY=> was up 0.84 percent
at 89.67. The euro <EUR=> rose 0.64 percent at $1.326.
U.S. light sweet crude oil <CLc1> rose 18 cents to $41.76 a
barrel.
Gold slipped as investors cashed in profits after the
precious metal hit a three-month high earlier this week.
Spot gold prices <XAU=> fell $12.10 to $884.90 an ounce.
Asian shares rose, helped by gains on Wall Street and a
jump in banking shares. Japan's Nikkei average <> closed
up 0.6 percent and the MSCI index of Asia-Pacific stocks
outside Japan <.MIAPJ0000PUS> climbed 2 percent.
(Reporting by Ellis Mnyandu, John Parry and Steven C. Johnson
in New York; Jamie McGeever, Atul Prakash, Alex Lawler and Jan
Harvey in London and Tracy Rucinski in Madrid; writing by
Herbert Lash; Editing by Kenneth Barry)
