* U.S. stocks surge on economic news, corporate upgrades
* U.S. bonds rise as traders look ahead to Fed statement
* Dollar rises versus yen on improved risk sentiment
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, March 17 (Reuters) - A smattering of welcome
economic news pushed U.S. stocks higher on Tuesday and gave
investors reason to boost their tolerance of risk, lifting the
dollar versus the yen.
Euro zone government bond prices fell as new supply, U.S.
and European data and gains on Wall Street more than eclipsed
the first down day for European stocks in a week.
But U.S. Treasuries rose on speculation the Federal Reserve
may signal at the end of its two-day policy meeting on
Wednesday that it will move to buy long-dated government debt.
Oil prices rose above $48 a barrel and tested the top end
of a trading range it has held so far this month, ahead of U.S.
inventory data expected to show a build in crude stocks.
A 22.2 percent jump in U.S. housing starts, the biggest
percentage gain since January 1990 and the first rise since
April, along with a smaller-than-expected rise in the producer
price index for the month of February dented the appeal of such
safe-havens as gold.
U.S. stocks rose in choppy trade as upbeat broker comments
on technology bellwether Cisco Systems <CSCO.O> and retailers
like Home Depot <HD.N> offset news of a dividend cut at Alcoa
Inc <AA.N>.
Higher oil prices also drove Exxon Mobil's <XOM.N> stock up
1.8 percent, making it the Dow's top advancer.
"I think there's just a lot of bad news priced into those
stocks. At some point the consumer will stop saving and start
spending again," said Kevin Kruszenski, head of listed trading
at KeyBanc Capital Markets in Cleveland.
Home Depot shares were among the Dow's top boosts, rising
4.6 percent after a brokerage raised its view on the stock and
several other major retailers to "buy."
Shares of networking equipment maker Cisco jumped 1.8
percent after Goldman Sachs added the stock to its conviction
buy list. Cisco was among Nasdaq standouts, along with Apple
Inc <AAPL.O>, up 2.6 percent.
Before 1 p.m., the Dow Jones industrial average <> was
up 75.35 points, or 1.04 percent, at 7,292.32. The Standard &
Poor's 500 Index <.SPX> was up 11.81 points, or 1.57 percent,
at 765.70. The Nasdaq Composite Index <> was up 27.17
points, or 1.94 percent, at 1,431.19.
European shares fell after five straight sessions of gain
as weakness in mining shares on a drop in metal prices and news
of Alcoa's dividend cut outweighed banking sector gains.
The FTSEurofirst 300 <> index of top European shares
provisionally closed 0.9 percent lower at 714.48 points.
"There have been some encouraging comments from people like
(U.S. Federal Reserve Chairman) Bernanke, but it's clear that
comments alone will not do the trick," said Luc Van Hecka,
chief economist at KBC Securities.
The U.S. dollar rose against the yen as the unexpected
surge in housing starts and firmer stocks helped improve
investors' sentiment toward riskier investments.
The housing starts report "is an encouraging sign for the
U.S. economy," said Matt Esteve, a foreign exchange trader at
Tempus Consulting in Washington.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.06 percent at 87.028. Against
the yen, the dollar <JPY=> was up 0.59 percent at 98.75
The euro <EUR=> rose 0.17 percent at $1.2987.
Trading was volatile in European debt markets but
investors' general inclination toward perceived riskier assets
made non-core euro zone debt such as Italian and Spanish bonds,
tightening their yield spread versus German Bund yields.
The German Finance Ministry also said it will increase 2009
bond issuance by some 20 billion euros, which took Bund prices
late in the day back down toward their earlier lows.
U.S. government debt gains were limited, however, by a
stronger stock market, which eroded some of the safe-haven bid
for bonds.
The U.S. Federal Reserve has repeatedly said it is
considering buying Treasuries in an effort to reduce long-term
interest rates to bring down the cost of borrowing for
mortgages and other loans.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 2/32, with the yield at 2.9621 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
1.0209 percent.
Data from industry group the American Petroleum Institute
(API) will be closely watched later on Tuesday as a preliminary
Reuters poll showed analysts forecast a 500,000 barrel increase
in domestic crude stocks last week. []
"Oil prices are very much linked to equity markets and
economic data at the moment, but we're still really sideways
trading in the same range we have been in for some time," said
Christopher Bellew, oil broker at Bache Commodities.
U.S. light sweet crude oil <CLc1> rose $1.08 to $48.43 per
barrel.
Spot gold prices <XAU=> fell $8.00 to $914.55 an ounce.
Asian stocks jumped to a one-month high. MSCI's index of
Asia Pacific shares traded outside Japan <.MIAPJ0000PUS> rose
for a third day, gaining 1.75 percent to a one-month high.
Japan's Nikkei share average <> rose 3.2 percent to
its highest close since Feb. 9.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Chris Reese
and Frank Tang in New York and Jamie McGeever, Joe Brock in
London; writing by Herbert Lash)
