* U.S. shares rebound on reassurances by Barclays
* Oil gains in volatile trade
* U.S. dollar weakens, helps give gold a boost
By Daniel Bases
NEW YORK, Jan 16 (Reuters) - U.S. stocks snapped back from
a midday swoon on the soothing assurances of Britain's Barclays
bank that it will report a pre-tax profit for 2008, helping
bank shares cut their losses on Friday.
Before an unexplained fall in Barclays shares, U.S. and
European share prices had traded higher, bolstered by the U.S.
government's $20 billion capital infusion into Bank of America.
Stocks in Tokyo had closed higher on the bailout news.
Washington's decision, which includes the sharing in losses
on $118 billion worth of mortgages, was announced during Asian
trading hours and sparked a rally for shares there that
extended through much of the European session.
The sell-off in Barclays was so sharp it deflated Wall
Street's rally. It also cut the gains in Europe although major
indexes managed to rebound to end the week on a high note.
Given the skittish nature of the markets, Barclays quickly
issued a statement reassuring investors it will report on Feb.
19 earnings well ahead of analyst estimates. (For more detail,
click on []).
"For better or for ill, we have to at least keep the banks
going," said Paul Nolte, director of investments at Hinsdale
Associates in Hinsdale, Illinois. "Investors are struggling
with what is happening and that's why we're seeing the
volatility."
Oil prices were pushed and pulled between forecasts of
lower demand and the impact of cold weather in most of the
United States.
Share prices for commodity-based companies were generally
stronger on Friday, helping lift stocks overall.
News of the bailout for Bank of America eased some investor
concerns about stress in the financial sector and helped pull
the U.S. dollar and the yen lower. Gold prices rose as a result
of the weaker dollar.
BANKS BATTERED
Bank of America <BAC.N> posted its first quarterly loss in
17 years on the heels of the government's midnight announcement
of a fresh round of aid to help the largest U.S. bank absorb
its Jan. 1 purchase of troubled brokerage Merrill Lynch & Co.
"Coming into 2009, we thought we had the big bailouts past
us as far as the financials are concerned, and that we can take
TARP money and pit it toward something else," said Matt McCall,
president of Penn Financial Group in Ridgewood, New Jersey.
"Now it's clear that there could be more big banks coming
back to the well, asking the government for money. And when
does this end and when do they say no? They just keep writing
checks," he added.
Citigroup, the former No. 1 and now No. 3 in U.S. banking,
reported a fourth quarter loss of $8.29 billion. Over the past
15 months Citigroup has amassed an astounding $92 billion in
losses. The bank announced plans to split itself in two and
shed troubled assets.
Citigroup <C.N> shares lost 8.62 percent to $3.50.
Bank of America's stock fell 13.7 percent to $7.18. The
share prices had risen initially on the news of the bailout
funds but the size of their quarterly losses -- $15.31 billion
for Merrill Lynch and $1.79 billion for Bank of America -- and
the need for more funds unsettled investors.
Barclays London-listed share price closed down 24.85
percent <BARC.L> and the U.S.-listed shares were in a similar
downward spiral. However the statement offered reassurance and
the U.S. share price cut its losses in half, ending the day
down 13.69 percent at $7.25 <BCS.N>.
U.S. stocks recouped their losses to end the day but were
down for the week.
The Dow Jones industrial average <> gained 68.73
points, or 0.84 percent, to 8,281.22. The Standard & Poor's 500
Index <.SPX> rose 6.38 points, or 0.76 percent, to 850.12. The
Nasdaq Composite Index <> climbed 17.49 points, or 1.16
percent, to 1,529.33.
For the week the Dow was down 5.6 percent, the S&P 500,
lost 5.9 percent, while Nasdaq gave up 3.02 percent. The broad
S&P 500 is now up almost 15 percent since the bear market low
on Nov. 21, after starting 2009 up about 20 percent from that
level.
U.S. markets will be closed on Monday for the Martin Luther
King Jr. Day holiday, a day before the inauguration of U.S.
President-elect Barack Obama.
European share gains were cut by the close, though major
indexes ended the week on a high note.
The FTSEurofirst 300 <> index of top European shares
ended up 1 percent at 803.90 points. However for the week the
index fell 7.3 percent.
Commodity related shares were among the biggest gainers,
with mining and oil shares such as Chevron <CVX.N> rising 1.37
percent, Exxon Mobil <XOM.N> gaining 1.88 percent Xstrata
<XTA.L> adding 6 percent, Total <TOTF.PA> rising 1.1 percent
and Rio Tinto <RIO.L> gaining 7.6 percent.
Japan's benchmark Nikkei 225 index <> rose 2.6 percent
in the early hours of the rescue plan. The retreat in the yen
also helped lift shares of exporters such as Honda Motor Co
<7267.T> which gained 7.95 percent. A weaker yen makes Japanese
exports more competitive globally.
The British pound recovered from its early drubbing to
trade up 0.43 percent to $1.4719 <GBP=>.
The dollar, while down versus a basket of currencies, rose
1.02 percent to 90.70 yen <JPY=>. The euro gained 0.79 percent
to $1.3257 <EUR=>.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
42/32, with the yield at 2.34 percent.
Investors sold longer-dated euro zone government bonds a
day after driving the benchmark 10-year yield to an historic
low. March German bund futures <FGBLc1> fell 52 ticks on the
day at 125.65, and well off the historic high of 126.53 reached
on Thursday.
U.S. light sweet crude oil <CLc1> settled up 3.1 percent,
to $36.51 per barrel, and spot gold prices <XAU=> rose 2.8
percent, to $840.30 an ounce.
(Additional reporting by Reuters bureaus around the world,
Editing by Chizu Nomiyama)
