By Jeremy Gaunt, European Investment Correspondent
LONDON, March 25 (Reuters) - Signs of life in the U.S.
housing market combined with JPMorgan's vastly improved bid for
Bear Stearns to lift prices sharply higher across global equity
markets on Tuesday, although the dollar remained weak.
European shares, reopening after a four-day weekend, were up
close to 3 percent, following on from strong gains in Asia.
Euro zone government bond prices fell sharply as equities
rose.
Markets were being driven by Monday's report of a surprising
rise in sales of U.S. pre-owned homes last month.
It was taken by some investors as a sign that the worst may
be over for the U.S. housing sector, which has been behind much
of the economic and credit worries of recent months.
In addition, JPMorgan <JPM.N> lifted its offer five-fold for
Bear Stearns <BSC.N> to $10 a share, alleviating some concern
about other banking shares.
"It gives people hope that maybe the darkest period is
over," said Hans Kunnen, head of investment markets research at
Colonial First State in Sydney.
But he added, "But the market is just operating like a yo-yo
within a band. I refuse to get carried away."
MSCI's benchmark world stock index <.MIWD00000PUS> was up
1.7 percent with its emerging markets counterpart gaining 2.2
percent.
The pan-European FTSEurofirst 300 <> gained 2.7
percent. Earlier, Japan's Nikkei average M.N225> closed up 2.1
percent at 12,745.22.
Investors remained cautious, however.
"This could be a temporary relief. To be convinced that this
is the floor, we need more indications that the credit market is
stabilizing," said Arthur van Slooten, strategist at Societe
Generale, in Paris.
WEAK GREENBACK
The dollar fell broadly as investors snapped four days of
gains, with persistent nerves on U.S. economic health dominating
sentiment.
"The negative dollar environment persists, there was
positive housing data but apart from that there is no solid news
to say that there will be a sustained dollar recovery," said
Niels Christensen, currency strategist at Nordea in Copenhagen.
The euro was up 0.65 percent to $1.5532 <EUR=> after falling
as low as $1.5341 in the previous session. The single currency
is down from a record high of $1.5904 hit last week.
Euro zone government bond prices took a hit as equities
rose.
The June Bund future <FGBLc1> was down 81 ticks on the day
at 116.73. The interest-rate sensitive-year Schatz yield
<EU2YT=RR> was up 18 basis points at 3.440 percent, while the
10-year Bund yield <EU10YT=RR> rose by 8 basis points to 3.841
percent.
Gold prices ticked higher. Spot gold <XAU=> was quoted at
around $930 per ounce, up around $10, but well below the
all-time peak of $1,030.80 an ounce touched earlier this month.
(Editing by Gerrard Raven)
