* U.S. stocks rise after steep sell-off; GE shares shine
* 10-year bond yields on euro debt hit 3-year lows
* Oil falls below $49 after touching new 3-1/2 year low
* Euro advances versus U.S. dollar, buoyed by Wall Street
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Dec 2 (Reuters) - U.S. and European shares
rebounded on Tuesday a day after a massive sell-off, while
rising government debt prices suggest the fear of a prolonged
global recession remains a major concern among investors.
The dollar fell against the euro and a basket of currencies
as rising stocks encouraged investors to emerge from the
perceived shelter of U.S. assets.
Crude oil hit a new 3-1/2-year low below $48 a barrel
before paring losses in response to the transatlantic rally in
equities.
Investor sentiment mostly hinged on the performance of
equity markets. In Europe, banks recovered after earlier falls
and energy shares rose, while on Wall Street investors snapped
up beaten-down shares, buoyed by news that General Electric
<GE.N> would maintain its high-yielding dividend payment.
GE shares climbed more than 11 percent, making the stock a
standout among Dow constituents. The dividend on the stock is
yielding almost 8 percent, while earlier GE said it expects
profit in the fourth quarter to come in at the low end of a
prior forecast.
"People are looking at GE and saying, 'Hey, well the
dividend yield is pretty good and they are sticking with their
earnings estimates, although it's at the lower end,'" said
Cummins Catherwood, managing director at Boenning & Scattergood
in West Conshohocken, Pennsylvania.
Before 1 p.m., the Dow Jones industrial average <> was
up 226.83 points, or 2.78 percent, at 8,375.92. The Standard &
Poor's 500 Index <.SPX> added 27.39 points, or 3.36 percent, at
843.60. The Nasdaq Composite Index <> rose 45.50 points,
or 3.25 percent, at 1,443.57.
Optimism about a government rescue for the U.S. auto
industry added to the positive tone, with General Motors <GM.N>
up 5.7 percent and Ford <F.N> rising 9.4 percent.
Chevron <CVX.N> and Exxon Mobil <XOM.N> were the top two
contributors to the Dow. The S&P energy index <.GSPE> was up
11.6 percent. The energy patch is the cheapest S&P 500 sector,
trading at a 12-month forward price-to-earnings ratio of 8.4,
according to ThomsonReuters data.
The FTSEurofirst 300 <> index of top European shares
closed up 1.9 percent at 825.31 in a volatile session.
Banks added the most points to the index, although stocks
within the sector were mixed, followed by energy stocks.
Banco Santander <SAN.MC> rose 6.5 percent, Royal Bank of
Scotland <RBS.L> jumped almost 17 percent and UBS <UBSN.VX> 5.9
percent.
BP <BP.L> added 2.6 percent, while Royal Dutch Shell
<RDSb.L> and Total <TOTF.PA> both gained 2.9 percent.
"We may have touched a bottom at the end of November and we
are starting to see a year-end rally, though it is going to be
a fairly shallow one. The market is extremely volatile at the
moment," said Franz Wenzel, strategist at AXA Investment
Managers in Paris.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
6/32 in price, driving its yield down to 2.70 percent. The
2-year U.S. Treasury note <US2YT=RR> fell 1/32 in price to
yield 0.93 percent.
The euro raced to session highs against the dollar, buoyed
by the sharp gains on Wall Street.
"There seems to be reduced risk aversion in the market
because of the rally in equities and that has pressured the
dollar against the euro and weighed on the yen," said Matthew
Strauss, senior currency strategist, at RBC Capital Markets in
Toronto.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.55 percent at 86.541.
Against the yen, the dollar <JPY=> rose 0.32 percent at 93.51.
The euro <EUR=> gained 0.72 percent at $1.2716.
Equities were also a driver on oil markets, with crude
prices rising with share prices.
"The equity market has been a main input for oil," said
Olivier Jakob, of consultancy Petromatrix. "Because the
slowdown in oil demand is linked to the global economy --
that's why the correlation is very strong."
U.S. light sweet crude oil <CLc1> fell 33 cents to $48.95
per barrel, after earlier trading as low as $47.36.
Spot gold prices <XAU=> rose $11.70 to $781.25 an ounce.
Asian equities slid overnight. The MSCI index of
Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> dropped about
4.5 percent, taking this year's losses to nearly 60 percent.
Japan's Nikkei average <> tumbled 6.4 percent as the
yen's surge added to the pain for the country's big exporters,
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Chris Reese in New York and Kirsten Donovan, Christopher
Johnson, Joanne Frearson and Jan Harvey in London; writing by
Herbert Lash; Editing by Leslie Adler)
