(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, April 7 (Reuters) - World stocks surged on
Monday, with U.S. equity markets trading near two-month highs,
and the dollar rose after a potential capital infustion at the
largest U.S. savings and loan boosted optimism that the worst
of the credit crisis may be over.
Oil jumped more than $2 a barrel as views that banks will
manage to shore up the ailing global financial system fueled
buying in commodities and global equities.
U.S. Treasury debt prices slid as the perceived ebbing of
the credit crisis cut demand for low-risk investments.
Gold jumped more than 2 percent to a one-week high.
Optimism also stemmed from speculation that finance chiefs
of the Group of Seven nations, meeting in Washington this
weekend, will consider coordinated steps to help banks and
markets battered by the U.S. mortgage meltdown.
"Fingers crossed, the outlook has changed, and we've moved
away from the panic that's really gripped the markets to a
greater degree of confidence that most of the global economy
will be able to avoid a recession," said Neil Parker,
strategist at Royal Bank of Scotland.
People familiar with the situation said Washington Mutual
Inc <WM.N> is close to obtaining $5 billion from investors led
by private equity firm TPG Inc.
An investment in WaMu, as the thrift is known, would add to
hopes that the hard-hit financial sector may have seen the
worst of the credit crisis. Financial shares jumped as
investors snapped up bargains in the downtrodden sector.
Citigroup Inc <C.N> was among the standouts. Its shares
were up 4 percent after the largest U.S. bank agreed to sell
its Diners Club International operations for $165 million to
Discover Financial Services <DFS.N>.
Financials were also higher in Europe after Merrill Lynch
raised Swiss bank UBS <UBSN.VX><UBS.N> to a "buy."
"Financials are early cycle leaders and the news is
consistent," said Subodh Kumar, chief investment strategist at
Subodh Kumar & Associates in Toronto.
"People are willing to step up to the plate to supply
capital and liquidity to the financials," Kumar said.
The Dow Jones industrial average <> was up 114.15
points, or 0.91 percent, at 12,723.57. The Standard & Poor's
500 Index <.SPX> added 15.41 points, or 1.12 percent, at
1,385.81. The Nasdaq Composite Index <> was up 18.28
points, or 0.77 percent, at 2,389.26.
European shares advanced, adding to last week's gains, led
by financials such as UBS and mining stocks, which gained on
higher metals prices and an upbeat analyst note.
The FTSEurofirst 300 index <> of top European shares
closed unofficially 0.8 percent higher at 1,329.37 points,
having risen by more than 4 percent last week.
Anglo American <AAL.L> climbed 4.1 percent and BHP Billiton
<BLT.L> put on almost 4 percent, making the DJ Stoxx European
basic resources index <.SXPP> the day's top sectoral performer,
with a rise of close to 3 percent.
Asian shares also gained, with resources companies
benefiting from stronger metals and oil prices.
Tokyo's Nikkei <> rose 1.3 percent, while stocks
elsewhere in Asia, as measured by MSCI's index <.MIAPJ0000PUS>
gained 1.06 percent. Asia ex-Japan stocks are still down 10
percent this year.
The global rally in stocks reversed Friday's rush into
bonds after a government report showed U.S. payrolls suffered
their biggest monthly loss in five years in March.
"The equity market was stronger overseas and here. This put
pressure on Treasuries," said Gary Pollack, head of fixed
income trading at Deutsche Bank Private Banking in New York.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 36/32 to yield 3.6059 percent. The 2-year U.S. Treasury
note <US2YT=RR> was down 11/32 to yield 1.9928 percent. The
30-year U.S. Treasury bond <US30YT=RR> was down 58/32 to yield
at 4.4164 percent.
Oil prices continued their climb. A surge in gas oil, the
benchmark for heating oil and diesel in Europe, on concerns
over tight supply, boosted U.S. heating oil and pushed crude
higher, analysts said. Gas oil hit a record high of $1,005 a
tonne.
U.S. light sweet crude oil <CLc1> rose $2.62, or 2.47
percent, to $108.85 per barrel.
Currency traders were reluctant to buy the euro
aggressively ahead of Thursday's European Central Bank policy
meeting and the G7 nations' gathering late in the week.
While sentiment toward the dollar had improved, worries
about the overall health of the U.S. economy continued to cast
a pall over the market, restricting the greenback's gains, they
said.
"Ahead of the G7 and ECB (meetings), people are not going
to get aggressive in terms of buying the euro," said Brian
Dolan, chief currency strategist at Forex.com in Bedminster,
New Jersey.
The dollar gained against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> up 0.44 percent
at 72.254. The euro <EUR=> was down 0.26 percent at $1.5695,
and against the Japanese yen, the dollar <JPY=> was up 1.19
percent at 102.73.
U.S. spot gold prices <XAU=> rose $11.70, or 1.28 percent,
to $924.60. However, gold, traditionally seen as a hedge
against oil-led inflation and an alternative investment to
currencies, was seen trading in a range in the near term.
(Reporting by Ellis Mnyandu, Lucia Mutikani and Richard Leong
in New York and Bate Felix, Atul Prakash and Peter Starck in
London; Editing by Dan Grebler)
