* U.S. stocks stage late session rally, end mixed
* Wal-Mart, other US retailers warn after weak December
* Oil, grains, metals down, gold up on dollar weakness
* Sterling rises after BoE cuts benchmark rate
By Vivianne Rodrigues and Daniel Bases
NEW YORK, Jan 8 (Reuters) - U.S. stocks staged a late
rebound on Thursday after news that Citigroup agreed to support
legislation aimed at stemming home loan foreclosures,
offsetting bleak economic data and a grim outlook for world No.
1 retailer Wal-Mart.
Markets in Europe and Asia had already closed lower before
the Citigroup news, mainly on renewed fears that the global
economy was weakening and corporations started warning
investors of weak demand.
That led to a sell-off in oil and a drop in grain prices on
prospects of prolonged weak demand.
Citigroup, a broadly diversified bank with a big mortgage
division, had opposed legislation that would have allowed
bankruptcy judges to change mortgage terms to allow debtors to
retain their homes.
The dollar fell while bonds and gold rose after Wal-Mart
Stores Inc <WMT.N> indicated that U.S. consumer spending, which
accounts for about two-thirds of the activity in the world's
largest economy, continued to falter amid mounting unemployment
and dwindling savings.
Shares in the company slid 7.49 percent after it cut its
profit forecast for its fourth quarter and said sales were
weaker than Wall Street estimates. (For details, see
ID:[]).
The drop in Wal-Mart shares weighed on U.S. blue chips and
on other retailing and consumer-oriented stocks world-wide.
The pound rose to a three-week high against the dollar
after the Bank of England cut its benchmark interest rate less
aggressively than some had expected.
The bank cut the rate to a record low of 1.5 percent to
prevent the credit squeeze from further slowing the economy.
British interest rates have fallen 3.5 percentage points since
October and some analysts believe the central bank will soon
follow the U.S. Federal Reserve and the Bank of Japan in
bringing borrowing costs close to zero. []
"Only a few weeks ago the consensus market call was for a
full 100-basis-point cut, so given today's more modest response
the news can be viewed as victory for pound bulls," said Boris
Schlossberg, director of currency research at GFT in New York.
The pound rose as high as $1.5372 <GBP=>, according to
Reuters data and last traded at $1.5235, up 0.82 percent on the
day. The euro earlier hit a low of 88.81 pence <EURGBP=D4>, its
lowest since mid-December. But it recovered some of its losses
against the pound to trade at 89.98 pence, off 0.23 percent.
The dollar slipped more than 1.67 percent against the yen
<JPY=> to 91.07 yen as falling share prices sapped demand for
risky investments.
The euro <EUR=> fell on weak economic reports in Europe but
rebounded after the grim U.S. data, to $1.3701, up 0.51
percent.
Reports showed economic sentiment in the euro zone plunged
to record lows in December and inflation expectations tumbled.
The data strengthened the case for another European Central
Bank rate cut when it meets next week [].
Weekly jobless claims in the U.S. unexpectedly fell last
week to their lowest level since Mid-October, a government
report showed. But the number of those remaining on jobless
rolls rose to a 26-year high.(For details, click
[])
"You are still seeing a lot of people collecting
unemployment claims, so the underlying conditions are very
poor," said Pierre Ellis, senior global economist at Decision
Economics Inc in New York. "The bad news in the continuing
claims is relentless."
Friday's U.S. jobs report is forecast to show a loss of
550,000 jobs in December.
Markets got little respite from an announcement by U.S.
President-elect Barack Obama on Thursday that he would offer
working families a $1,000 tax cut and improve energy efficiency
in millions of American homes in order to create jobs and
stimulate the economy. []
U.S. stocks ended mixed. The Dow Jones industrial average
<> fell 27.24 points, or 0.31 percent, to 8,742.46. The
Standard & Poor's 500 Index <.SPX> rose 3.08 points, or 0.34
percent, to 909.73. The Nasdaq Composite Index <> gained
17.95 points, or 1.12 percent, to 1,617.01.
MSCI's world stock index <.MIWD00000PUS> lost 0.3 percent
to 232.39, while the pan-European FTSEurofirst 300 <>
shed 0.79 percent to 870.92. Tokyo's Nikkei average <>
lost 3.93 percent to 8,876.42, erasing all of the new year
gains.
INVESTORS SELL OIL, METALS
Crude oil prices were down on the prospects for weakening
global economic demand. On the New York Mercantile Exchange
crude prices settled down 93 cents or 2.18 percent to $41.70 a
barrel <CLc1>.
Prices fell even as violence in the Middle East, a recent
driver of prices, escalated. Several rockets fired from Lebanon
struck northern Israel on Thursday in an attack seen as linked
to Israel's war on Hamas Islamists in the Gaza Strip.
Government bonds in the United States and Europe mostly
rose in a safe-haven bid, but gains were limited by concerns
over the impact of a wave of new debt supply.
"As we hear more about the plans for fiscal stimulus,
participants are saying that is going to mean a lot more supply
on the market," said David Dietze, chief investment strategist
at Point View Financial Services in Summit, New Jersey.
Benchmark 10-year U.S. Treasury notes <US10YT=RR> rose
12/32 in price to yield 2.45 percent. The 10-year Bund
<EU10YT=RR> yield fell 7.6 basis points to 3.131 percent.
Gold prices rose as the dollar weakened. Spot gold <XAU=>
rose $14.90, or 1.77 percent, to $859.10. Prices of corn,
wheat, soybeans and copper ended the day lower.
(Additional reporting by Ellis Mnyandu, Gertrude Chavez and
Chris Reese in New York and Dominic Lau in London; Editing by
Dan Grebler)
