(Updates with U.S. stocks open, U.S. data, adds quotes)
By Steven C. Johnson
NEW YORK, Jan 24 (Reuters) - Global stock markets rose on
Thursday, hoping a plan to rescue ailing bond insurers would
prevent a fresh round of credit losses but doubts about a U.S.
stimulus package kept a lid on U.S. stock gains.
But while the Nasdaq inched higher on Thursday following
strong results from Qualcomm Inc <QCOM.O>, concerns that the
U.S. economy has yet to hit bottom and doubts about plans for a
stimulus package kept the broader Wall Street stock markets
little changed.
A report showing a surprise decline in the number of U.S.
workers applying for jobless benefits also induced optimism,
dulling demand for safe-haven government bonds, though claims
of a massive trade fraud at a major bank added to financial
worries.
Oil futures rose above $88 a barrel <CLc1>, in tandem with
the equity market rebound, while the dollar weakened.
European shares rose sharply on Thursday, with the
FTSEurofirst 300 <> up 5.4 percent and Japan's benchmark
Nikkei <> closing 2.1 percent higher.
U.S. shares snapped a five-day losing streak on Wednesday
on news that New York's insurance regulator had pressed major
banks to put up billions of dollars in an effort to rescue
wobbly bond insurers.
Bond insurers have become the latest sector to worry
investors in the credit crisis. The debt they underwrite shares
the investment-grade ratings many of these firms carry, so
downgrades due to losses would drag debt ratings down as well.
This could force investors to dump billions of dollars of
municipal bonds, repackaged loans and the like onto markets,
sending borrowing costs soaring and forcing more investor
writedowns.
"If these (insurance) guys would fail, it would be much
more catastrophic for banks' balance sheets and we would see
another round of writedowns," said Edmund Shing, strategist at
BNP Paribas in Paris.
The market also drew support from expectations that the
Federal Reserve would follow this week's surprise interest rate
cut with more easing at its Jan. 29-30 policy meeting.
"I think the markets have now priced in a recession, and
we'll see more normal trading at lower levels," said Stephen
Massocca, co-chief executive at San Francisco-based investment
bank Pacific Growth Equities.
On Wall Street, the Dow Jones industrial average <>
edged up 25.36 points, or 0.21 percent, to 12,295.53. The
Standard & Poor's 500 Index <.SPX> was up 3.28 points, or 0.25
percent, at 1,341.88. The Nasdaq Composite Index <> was up
20.20 points, or 0.87 percent, at 2,336.61.
Anxiety remained, however, with news of Societe Generale's
<SOGN.PA> admission that an "exceptional fraud" by one of its
traders would cost the group an estimated 4.9 billion euros
($7.1 billion). The alleged fraud would be one of the biggest
in financial history. []
SocGen also announced plans to raise 5.5 billion euros
through a capital increase to shore up its balance sheet.
SocGen shares were down 4.1 percent after an earlier trading
suspension was lifted.
In foreign exchange trading, the euro climbed 0.7 percent
to $1.4737 <EUR=> after European Cental Bank policymaker Axel
Weber said the central bank remains focused on inflation risks,
suggesting it is unlikely to follow the Fed's lead and slash
euro-zone rates.
"They are consistently saying that (euro-zone) growth is
OK, there is going to be some effect from a U.S. slowdown, but
in their view, they are saying the economy is going to be
strong and (inflation) is going to be an issue," said Brian
Taylor, head currency trader at M&T Bank in Buffalo, New York.
At 4 percent, euro zone benchmark interest rates are now
half a percentage point above U.S. rates, making European debt
more attractive to investors than U.S. paper.
The dollar was flat at 106.68 Japanese yen <JPY=>.
In the government bond market, U.S. Treasury debt prices
were lower. The benchmark 10-year U.S. Treasury note
<US10YT=RR> was down 8/32 in price, with the yield at 3.633
percent. The 2-year U.S. Treasury note <US2YT=RR> was down
5/32, with the yield at 2.219 percent. The 30-year U.S.
Treasury bond <US30YT=RR> was down 10/32, yielding 4.3332
percent.
European government bonds also fell on Thursday as
investors moved into stocks, though yields remained above
comparable U.S. debt. The 10-year Bund yield stood at 4.01
percent <EU10YT=RR> while two-year yields were at 3.49 percent
<EU2YT=RR>.
(Additional reporting by Jeremy Gaunt, Eva Kuehnen and Randy
Fabi in London and Kristina Cooke, Lucia Mutikani and Richard
Leong in New York; editing by Gary Crosse)
