(Recasts with U.S. markets, adds byline; dateline previous
SINGAPORE)
By Herbert Lash
NEW YORK, March 24 (Reuters) - U.S. stocks jumped sharply
and bonds fell on Monday as JP Morgan moved to complete a
sharply higher bid for troubled investment bank Bear Stearns,
easing nervous investors' fears about a global credit crisis.
The dollar firmed and bond prices fell on the Bear bid and
also on a sign that a U.S. housing recovery may finally be
underway, with a report that existing sales moved higher in
February.
Oil slipped amid a recovery in the U.S. dollar and
lingering worries over slowing energy demand.
Trading volume was thin as financial markets in Europe and
parts of Asia remained closed after the Easter weekend.
But a crisis that has gripped financial markets for months
remained the center of attention. In a move to appease
disgruntled shareholders JPMorgan Chase & Co <JPM.N> raised its
all-stock offer for Bear Stearns Cos <BSC.N> to about $10 a
share, compared with $2 last week.
In Europe, British Prime Minister Gordon Brown and French
President Nicolas Sarkozy will urge banks this week to make
"full and immediate disclosure" of write-offs due to the global
credit crisis, British officials said on Monday.
Uncertainty over the scale of bad debts on banks' books,
which some estimates put as high as $600 billion, has sapped
investor confidence and pushed many stock indexes around the
world into bear territory.
Bear Stearns, which had been ranked the No. 5 U.S.
investment bank, collapsed amid large subprime mortgage losses
and fading investor confidence prompted a run on the bank.
"Clearly, this increases the chance the deal goes through,"
said James Ellman, a portfolio manager with Seacliff Capital.
"But there are still going to be employees and shareholders
unhappy with $10 a share."
Major U.S. stock indexes rose, led by financial shares,
which gained about 2.5 percent, according to the Standard &
Poor's index of financial stocks <.GSPF>.
Bear Stearns shares surged 80 percent to $11.52 on the
news, while JPMorgan shares gained 3.6 percent to $47.64.
Tthe Dow Jones industrial average <> rose 234.70
points, or 1.90 percent, to 12,596.02. The Standard & Poor's
500 Index <.SPX> gained 26.49 points, or 1.99 percent, to
1,356.00 and the Nasdaq Composite Index <> rose 70.83
points, or 3.13 percent
The dollar rallied across the board and climbed to session
highs versus the yen, boosted as U.S. Treasury prices yields
climbed after the surprising U.S. existing home sales.
The euro fell 0.3 percent against the dollar to $1.5380
<EUR=>, from $1.5420 just before. Against the yen, the dollar
jumped to the day's highs at 100.79 yen <JPY=>, well off a
nearly 13-year low of 95.77 yen posted last week.
The dollar index, a measure of the greenback's value
against six major currencies, was up 0.4 percent at
73.039<.DXY>. It earlier rose 73.194.
"The housing sector and mortgages are at the center of
problems in the financial sector. Any good news in housing at
the margin would be very helpful at this point for the dollar,"
said Ken Landon, global currency strategist at JPMorgan Chase
in New York.
While the pace of existing homes was better than consensus
estimates, a bottom in the beleaguered U.S. housing market is
too early call, many analysts said.
Existing home sales rose to a 5.03 million-unit annual rate
in February but median home prices fell 8.2 percent, the
sharpest drop since the National Association of Realtors began
keeping records in 1968.
"Selling more homes cheaper -- too early to call that a
bottom," said Ian Lyngen, interest rate strategist at RBS
Greenwich Capital in Greenwich, Connecticut.
It will be hard to work off the housing inventory with
deteriorating labor markets and high consumer debt levels, said
Josh Stiles, managing director and bond strategist at
IDEAglobal in New York.
"We don't believe that the housing market has bottomed
and we don't believe that the last bad news about financial
stress is behind us either, but Treasuries were overdue for a
correction," Stiles said.
U.S. Treasury debt prices fell as a stock market rally and
positive developments on the housing and credit front weakened
the bid for safe-haven U.S. government debt.
Two-year Treasury notes fell 12/32 in price, their yields
<US2YT=RR> rising to 1.81 percent, from 1.61 percent on
Thursday.
The benchmark 10-year Treasury note's price, which moves
inversely to its yield, was down 1-12/32, its yield <US10YT=RR>
rising to 3.51 percent from 3.34 percent on Thursday.
U.S. short-term interest rate futures also fell sharply.
The implied prospects for the Federal Reserve to cut a key
lending rate by half a percentage point in April fell to 22
percent from 56 percent last week. A 25 basis point rate cut,
to 2 percent, is still fully priced.
Oil prices fell moderately, extending last week's sharp
declines. U.S. crude futures <CLc1> fell 22 cents to $101.62 a
barrel after falling more than $1 earlier -- bringing them more
than $10 below last Monday's $111.80 peak.
Brent crude <LCOc1> was up 30 cents to $100.68.
Asian shares rose in holiday-thinned trade on Monday, led
by a 4 percent gain for Taiwan after an opposition win in the
presidential election boosted expectations for better trade
ties and less political tension with China.
Taiwan markets surged the first trading day after a victory
by Ma Ying-jeou of the more China-friendly Nationalist Party,
or Kuomintang (KMT), boosting hopes for a greater flow of
tourists, trade and capital between Taiwan and China.
Taiwan's main TAIEX <> jumped more than 6 percent at
the open -- its biggest one-day percentage gain in more than
seven years -- before easing back to a gain of 4 percent.
The Taiwan dollar <TWD=TP> also jumped to a 10-year high of
T$30.218 against the dollar.
Activity was subdued in Asia as markets in many parts of
the region were closed for the Easter holiday.
MSCI's index of shares outside Japan <.MSCIAPJ> rose 1.3
percent, although it is still down 18 percent so far this
year.
Tokyo's Nikkei index <> traded in and out of the red
to end the session flat. Investors were braced for the upcoming
corporate results season.
(Reporting by Herbert Lash. Editing by Richard Satran)
