* World stocks slump then recover on US auto bailout news
* Bonds jump, US dollar falls then recovers
* US auto bailout fails in Senate, revived by White House
NEW YORK, Dec 12 (Reuters) - World stocks ended lower
andthe U.S. dollar fell on Friday after the U.S. Congress
failed late Thursday to pass an automaker bailout package, but
the White House's assurance that it would try to prevent the
car makers' bankruptcy helped markets to recover some ground.
U.S. stocks recovered from an early selloff to end
marginally higher on the uncertainty about the car
manufacturers bailout package. [].
GM, Ford and Chrysler employ nearly 250,000 people directly
and 100,000 more jobs at parts suppliers could depend on their
survival. GM stock ended down 4.37 percent but Ford was up 4.83
percent.
"The issue is still very much in the air, especially
because the Bush administration had openly resisted using TARP
funds for anything but rescuing the financials sector, so this
was a surprise that they were willing to consider doing it,"
said Hugh Johnson, chief investment officer of Johnson
Illington Advisors, in Albany, New York.
"That tells you the issue has not been resolved and the
markets are going to remain vulnerable to moves on the auto
manufacturers."
Investor confidence suffered another blow with the arrest
of former Nasdaq Chairman Bernard Madoff, who was charged with
running a $50 billion pyramid scheme in what would be one of
the largest fraud cases ever. [].
The Dow Jones industrial average <> ended up 0.76
percent, or 65.07 points at 8,630.16. The Standard & Poor's 500
Index <.SPX> closed up 6.22 points or 0.71 percent at 879.81.
The Nasdaq Composite Index <> gained 32.84 points, or 2.18
percent, to 1,540.72.
Earlier European shares ended lower on Friday, dragged down
by banking stocks while automakers suffered following the
failure of rescue talks for U.S. car manufacturers.
The FTSEurofirst 300 <> index of top European shares
closed 2.8 percent lower at 829.65 points, after falling as low
as 811.18. It has declined about 45 percent this year, hurt by
a global credit crisis.
Banks took most points off the index, with HBOS falling 23
percent after it said bad debt had soared.
"It's a very fragile situation and we are bumping along the
bottom at the moment," said Darren Winder, head of strategy
research at Cazenove.
"There isn't a great deal of confidence around at the
moment. People are fearing the worst for the economy in 2009.
Obviously there is a general lack of liquidity in the market."
The MSCI world stock index ended down 0.99 percent at
216.75.
BONDS VOLATILE TOO
U.S. Treasury bond prices rose Friday as investors grew
leery of venturing outside of this safe-haven as uncertainty
over the fate of U.S. automakers lingered.
Bonds had been underwater for much of the session after
data showing that consumer spending and sentiment were
deteriorating less rapidly than some had believed.
But with U.S. car companies in limbo and politicians in
Washington sending mixed signals as to what comes next, the
bond market was experiencing a renewed bid.
Ten-year notes <US10YT=RR> rose 7/32 for a yield of 2.58
percent, down from 2.61 percent on Thursday. Yields hit a
five-decade low of 2.51 percent last week, and a Treasury bill
auction earlier this week got a lot of attention for snagging a
rate of zero for the first time ever.
"Even though market participants may disagree on the
benefits or costs of such a bailout, markets don't like
surprises and definitely dislike the uncertainty that these
surprises create," said Eugenio Aleman, economist at Wells
Fargo in Minneapolis.
Euro zone government bonds slid on Friday after the U.S.
government renewed expectations for a package to help its
ailing auto sector and on the back of better-than-expected U.S.
economic reports.
Late in the session March Bund futures <FGBLH9> were 85
ticks lower on the day at 121.57, having earlier risen about
one full point to a session high of 123.43.
The two-year euro zone government bond yield <EU2YT=RR>
gained 8.3 basis points on the day to 2.224 percent, while the
10-year yield <EU10YT=RR> put on about 8 basis points to 3.300
percent.
DOLLAR SLUMPS FURTHER
The U.S. dollar exited North American trade lower against
the yen on Friday but recovered from a 13-year low after the
White House said it would consider steps to help the ailing
U.S. auto sector avoid collapse.
Earlier, the dollar plunged to 88.10 yen <JPY=>, its lowest
since mid-1995, after the U.S. Senate rejected a $14 billion
auto rescue plan.
The euro fell 0.6 percent to 121.81 yen <EURJPY=>.
Another reason for the dollar's rebound against the yen on
Friday, analysts said, was fear Japan would intervene to weaken
the currency. A strong yen makes Japanese exports more
expensive in overseas markets.
"The risk is there and traders are not willing to push the
dollar lower in case Japan intervenes," said David Watt, senior
currency strategist at RBC Capital Markets in Toronto.
U.S. crude oil futures ended lower on Friday after the U.S.
Senate failed to pass a bailout for automakers and as Goldman
Sachs predicted oil prices could fall to $30 a barrel.
In volatile trading on the New York Mercantile Exchange,
January crude <CLF9> settled down $1.70, or 3.54 percent, at
$46.28 a barrel, snuffing a two-day rally.
Gold prices jumped to a seven week high early around
$825.49 an ounce <XAU=>, before ending little changed around
$821.30.
(Reporting by Leah Schnurr, Pedro Dacosta, Steve Johnson,
Gene Ramos in New York, with Brian Gorman, George Matlock, Ian
Chua, and Jan Harvey in London; editing by Clive McKeef)
