* U.S. stocks rise, led by IBM, rebound in financials
* Sterling bounced back from 23-year lows on G7 talk
* U.S. Treasury debt slides as safe-haven bids dry up
* Oil jumps over 6 percent on OPEC production cuts
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Jan 21 (Reuters) - Wall Street stocks rallied on
Wednesday, lifted by a solid outlook from bellwether IBM and a
strong rebound in financials a day after a steep slide, while
U.S. government bond prices slid on waning safe-haven bids.
U.S. stocks jumped more than 3 percent in a relief rally,
but was not enough to erase the year's biggest single-day
equity losses that were set a day earlier.
Despite the U.S. rally, investors said concerns about banks
lingered and European shares fell on deepening fears that
several major financial institutions there would not survive
the credit crisis.
The British pound bounced from 23-year lows against the
dollar and trimmed losses against the euro after a Group of
Seven source said sterling weakness will be discussed at the
February meeting of the G7 industrialized economies.
Oil futures rose more than 6 percent to above $43 a barrel
as supply cuts by member countries of the Organization of
Petroleum Exporting Countries outweighed fresh evidence that a
deepening global slowdown is crushing demand for energy.
Signs of mounting job losses highlighted the depth of a
still worsening slowdown across the euro zone, sending two-year
government bond yields in the bloc to historic lows as
investors rushed to buy the safest and most liquid fixed-income
assets.
But U.S. government debt prices fell as the stocks rally
undercut a bid for safe-haven assets.
International Business Machines Corp <IBM.N> contributed
the most to the Dow's gain, jumping 11.5 percent -- its biggest
single-day rise by percentage gain in six years.
The world's top technology services company late Tuesday
posted a quarterly profit and gave a 2009 outlook that
surpassed expectations.
Financial shares advanced as investors hunted for bargains
in the hard-hit sector. JPMorgan Chase & Co <JPM.N> soared 25
percent and Bank of America Corp <BAC.N> gained almost 31
percent on news that Chief Executive Kenneth Lewis spent almost
$1.2 million to buy 200,000 shares on Tuesday.
"After the news that Bank of America insiders have bought
stock, there has been some aggressive buying in both the stock
and call options on hopes that the shares have hit bottom,"
said William Lefkowitz, options strategist at brokerage firm
vFinance Investments in New York.
The Dow Jones industrial average <> closed up 279.01
points, or 3.51 percent, to close at 8,228.10 points. The
Standard & Poor's 500 Index <.SPX> gained 35.03 points, or 4.35
percent, to 840.24. The Nasdaq Composite Index <> climbed
66.21 points, or 4.6 percent, at 1,507.07.
Tough questions during a U.S. Senate hearing on Treasury
secretary designate Timothy Geithner raised doubts about his
confirmation, leading the Wall Street rally to stall a bit.
European shares fell for the tenth session in the last 11
as a relief rally among battered banking shares failed to
offset declines in other sectors, notably energy.
The FTSEurofirst 300 <> index of top European shares
fell 0.7 percent to close at a two-month low of 769.15, pulled
down by energy stocks despite a rise in crude oil prices.
British banks pared steep losses despite concerns they may
need more government aid or be nationalized.
Barclays <BARC.L> fell 9.3 percent, after retracing losses
of more than double that, while Lloyds Banking Group <LLOY.L>
ended the session up 0.7 percent after sliding as much as 26
percent.
However, banking troubles left many investors unnerved. The
recapitalization of the ailing Royal Bank of Scotland <RBS.L>
blew out the British deficit to its highest on record in
December.
The prospect that more dramatic intervention may be needed
as euro zone economies tip into recession tugged a European
bank index to a 16-year low and pushed the yield on two-year
German government debt to as low as 1.409 percent <EU2YT=RR>.
The pound <GBP=> last traded up 0.4 percent at $1.3949,
after slumping to a session low of $1.3622, its lowest since
September 1985.
"The UK financial system is in tatters," said Ron Simpson,
director of currency research at Action Economics in Tampa,
Florida. "We have not seen a bottom for sterling."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 1.14 percent at 85.396.
Against the yen, the dollar <JPY=> fell 0.43 percent to 89.41
yen.
The euro <EUR=> rose 1.21 percent to trade at $1.3043.
The price of the U.S. benchmark 10-year Treasury note
<US10YT=RR>, which moves inversely to its yield, fell 1-13/32,
for a yield of 2.53 percent, nearly 50 basis points above the
five-decade yield low of 2.04 percent the 10-year note hit on
Dec. 18.
The U.S. benchmark 10-year Treasury note <US10YT=RR> shed
1-4/32 in price to yield 2.55 percent, while the 30-year U.S.
Treasury bond <US30YT=RR> slid -3-31/32 in price to yield 3.16
percent.
U.S. light crude for March delivery <CLc1> settled at
$43.55, up $2.71 in its first day as the front-month contract.
London Brent crude <LCOc1> rose $1.40 to $45.02 a barrel.
OPEC is fully enforcing its deepest ever oil supply curbs,
which should be enough to boost prices, the group's president,
Angolan oil minister Botelho de Vasconcelos, told Reuters.
Gold for February delivery <GCG9> settled down $5.10 at
$850.10 an ounce in New York.
(Reporting by Leah Schnurr, Ellen Freilich, Nick Olivari and
Gertrude Chavez-Dreyfuss in New York; Doris Frankel in Chicago;
Jamie McGeever, David Sheppard and Brian Gorman in London;
writing by Herbert Lash; editing by Gary Crosse)
