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LONDON)
By Herbert Lash
NEW YORK, Oct 14 (Reuters) - Oil prices rose and global
stocks soared for a second day on Tuesday after Washington
joined European plans to pump billions of dollars into banks in
a concerted effort to turn back a worldwide financial crisis.
Commodity prices jumped and the euro rose as investors bet
the cash infusion would provide markets the means to start
climbing out of the worst crisis since the Great Depression.
Investors unwound panic trades made last week when fears
swept financial markets that the world was heading into a
prolonged global recession.
U.S. Treasury debt prices added to steep losses after the
latest news on the bank rescue plan spurred a rally in stocks
and curbed demand for safe-haven government debt. Some
investors sold U.S. Treasury paper to buy euro zone bonds,
traders said.
The government moves, aimed at loosening drum-tight credit
markets worldwide, began to show effect. The interbank cost of
borrowing dollars for three months posted its biggest decline
since March, according to the British Bankers Association.
"This is what traders wanted to see -- bank balance sheets
being shored up -- and the best way to do it is with a direct
capital infusion," said Greg Salvaggio, vice president of
trading at Tempus Consulting in Washington.
"It's immediate and it should help lending conditions
ease," Salvaggio said.
The Nasdaq fell as concerns about a recession and the
third-quarter corporate profit outlook tempered optimism over
the bank rescue plan.
Shortly after 10 a.m. (1400 GMT), the Dow Jones industrial
average <> was up 76.54 points, or 0.82 percent, at
9,464.15. The Standard & Poor's 500 Index <.SPX> was up 8.27
points, or 0.82 percent, at 1,011.62. The Nasdaq Composite
Index <> was down 21.60 points, or 1.17 percent, at
1,822.65.
European stocks rose sharply. The pan-European FTSEurofirst
300 index <> was up 3.1 percent at 966.72, adding to its
biggest ever daily percentage rise on Monday when it jumped
more than 10 percent.
"The bank plan is another step in the right direction. The
markets have been looking for it and they're reacting
positively to it," said Jim Awad, chairman of W.P. Stewart & Co
in New York.
"I expect it to add ... stability to the financial and
credit markets, but it's important to not get overly euphoric
because we still have to enforce it," he added.
Early in New York, the euro was up almost 1 percent at
$1.3690 <EUR=>, paring gains from a session peak of $1.3769.
Against the yen, the euro rose about 2 percent to 141.72 yen
<EURJPY=>, before falling to 140.40. Last week, it hit a
three-year low at 132.25, according to Reuters data.
The dollar was down 0.3 percent against the U.S. Dollar
Index <.DXY>, a basket of major currencies, at 81.278.
Against the yen, the dollar <JPY=> was up 0.39 percent at
102.39.
Oil initially rose more than $3, extending the previous
session's 4 percent gain, as euphoria over government moves to
shore up banks gave way to expectations of a global recession.
U.S. light sweet crude oil <CLc1> rose 18 cents to $81.37
per barrel.
Gold and other precious metals also initially rose as the
bank stabilization plans sparked a rally in commodities, with
platinum up more than 6 percent and silver climbing 4 percent.
But analysts said the rally in equities curbed interest in
the precious metal as a haven from risk, curbing its rise.
Spot gold prices <XAU=> rose $2.30 to $833.10 an ounce.
Japan's Nikkei stock index <> gained more than 14
percent on Tuesday. Japanese markets were closed on Monday for
a national holiday. MSCI's main world stock index
<.MIWD00000PUS> was up 3.8 percent after plunging 20 percent
last week.
(Reporting by Ellis Mnyandu, Ellen Freilich and John Parry in
New York and Joe Brock and Jan Harvey in London; Writing by
Herbert Lash; Editing by James Dalgleish)
