* Stocks, oil up on US home loan hopes
* Yen, dollar weaken
* G7 financial leaders to meet this weekend
* Euro zone GDP contracts
By Dominic Lau
LONDON, Feb 13 (Reuters) - Hopes for a U.S. government plan
to subsidise mortgages lifted stocks and oil prices on Friday
but the yen and government bonds fell, while investors look to a
G7 meeting for further action.
News that Washington was hammering out a programme to
subsidise mortgages for homeowners before they fall into loan
arrears helped Wall Street stage a late recovery that extended
into gains in Asian markets.
The MSCI Asia ex-Japan index <.MIASJ0000PUS> advanced 2
percent and Tokyo's Nikkei average <> put on 1 percent. In
Europe, the FTSEurofirst 300 index <> climbed 1.8 percent.
But U.S. stock index futures <DJc1> <SPc1> eased 0.3
percent.
"We're seeing the 'buy the rumour, sell the news' strategy.
The market rallied on the suspense surrounding the Obama
stimulus plan, then retreated after the banking rescue plan was
unveiled," said Valerie Plagnol, chief strategist at CM-CIC
Securities, in Paris.
"But it will take a while before these plans could have an
impact, so the recent short bounces on the stock market might
just be false starts."
European credit spreads were mixed, with the strong stock
markets helping to lift the mood, and the primary market
continuing with a steady flow of deals from BP <BP.L> and
another from Eni <ENI.MI> seen later this year.
The U.S. Congress is also expected on Friday to pass a $789
billion economic stimulus package that is aimed at unleashing
large spending and tax cuts to help dig the economy out of a
14-month recession. []
Copper prices were higher, with the three-month futures
<MCU3=LX> up 1.1 percent, while oil prices <CLc1> were higher at
$34 a barrel.
Financial markets will look to the meeting of Group of Seven
financial leaders in Rome on Friday and Saturday for further
actions to arrest the worsening economic crisis, triggered by a
meltdown in risky U.S. subprime mortgages.
The euro zone economy saw its deepest contraction on record
in the fourth quarter of 2008, hit by a record weak performance
in Germany as well as deeper-than-expected falls in output in
France and Italy.
The data added pressure on the European Central Bank to cut
interest rates by 50 basis points from 2 percent in three weeks.
WEAKER YEN, DOLLAR
The dollar, however, fell against the euro <EUR=> and the
pound. But the U.S. currency gained 0.5 percent to 91.43 yen.
The yields on benchmark 10-year U.S. Treasuries <US10YT=RR>
moved out by 2 basis points and those on the 10-year Bund
<EU10YT=RR> widened by a similar margin.
"Equities have been rallying, and so we're seeing some
profit-taking," said Niels From, chief analyst at Nordea in
Copenhagen.
"The German GDP figures were weaker than consensus, but it
seems that the market had been expecting a bad figure, so the
impact on bonds has been limited."
Corporate earnings suffered with the dire economic picture.
Air France-KLM <AIRF.PA> swung to a third-quarter operating loss
of 194 million euros, reflecting what the airline called a
deepening economic crisis, and pledged to drive down costs
including by freezing new hiring.
Asian lender DBS <DBSM.SI> suffered a bigger-than-expected
40 percent drop in quarterly profit, its worst results in three
years, hit by an increase in bad debt.
Credit Suisse cut its forecast for 2009 operating earnings
per share for U.S. companies to $58 from $70 and expected U.S.
reported EPS to stand at $36.
In Europe, the broker forecast company operating earnings to
fall by 34 percent over the next 12 months versus a previous
forecast of minus 27 percent.
(Additional reporting by Blaise Robinson in Paris and Naomi
Tajitsu in London; editing by Stephen Nisbet)
