* Global stocks rebound on Wells Fargo, U.S. home prices
* Euro rises against dollar as global stocks turn higher
* U.S., euro zone government debt eases, safety bid wanes
* Oil falls on U.S. inventories rise, IMF recession gloom
(Recasts; updates U.S. markets; changes byline, dateline,
previous LONDON)
By Herbert Lash
NEW YORK, April 22 (Reuters) - Record profit at Wells Fargo
and rising American home prices in February helped U.S. and
European stocks rebound on Wednesday as oil prices fell on a
jump in crude stocks and a gloomy IMF global growth forecast.
U.S. and euro zone government debt prices turned lower in
choppy trade while the euro rose against the U.S. dollar as the
recovery in equity markets helped eased risk aversion.
But the International Monetary Fund said in its latest
World Economic Outlook the world economy had fallen into a
severe recession, helping push down oil prices and oil-related
shares. For more see [].
The Washington-based institution said its revisions to the
global outlook stem from assumptions that financial markets
will take longer than previously expected to stabilize.
Prices of U.S. single-family homes rose by a seasonally
adjusted 0.7 percent in February from the previous month, but
were down 6.5 percent from a year earlier, the Federal Housing
Finance Agency said. []
At 1 p.m. EDT (1700 GMT), the Dow Jones industrial average
<> was down 20.23 points, or 0.25 percent, at 7,949.33. The
Standard & Poor's 500 Index <.SPX> was up 1.90 points, or 0.22
percent, at 851.98. The Nasdaq Composite Index <> was up
16.51 points, or 1.00 percent, at 1,660.36.
The MSCI world equity index <.MIWD00000PUS> was up 0.5
percent, having dipped in and out of positive territory earlier
in the session.
"In the medium term we're trying to find a bottom," said
John Haynes, strategist at Rensburg Sheppard in London.
"The test is the earnings season, that stocks suffer bad
news but react well to that. So far they're not passing that
test, but not failing it decisively either."
Bank shares in Europe recovered on Wells Fargo's results
after slipping on disappointing quarterly results from Morgan
Stanley <MS.N>. But U.S. banking indexes fell, pulled down by
large regional banks.
Morgan Stanley's results rekindled concerns over whether
the financial system had recovered enough to lead the United
States out of what in May will be the longest U.S. post-war
recession.
"I don't think the financial stocks need to lead the market
but there needs to be a feeling that the financial system is
sound enough to provide a base for the economy and other
sectors for the market to go forward," David Scott, chief
investment officer at Chase Investment Counsel in
Charlottesville, Virginia. "I don't think we're there yet."
Positive comments from corporate executives about the state
of the global economy after a mixed bag of first-quarter
results offset recent pessimism about company outlooks.
Caterpillar Inc <CAT.N> was the biggest boost to the Dow,
surging 6 percent, after JP Morgan upgraded the construction
equipment maker on its improved balance sheet and liquidity.
U.S. biotech shares got a lift from better-than-expected
results from Gilead Sciences <GILD.O>.
The FTSEurofirst 300 <> index of top European shares
closed 1 percent higher at 795.24 after falling as much 1.4
percent.
The rebound in equities, and a sell-off in the British
pound earlier, contributed to gains in the euro.
"U.S. stocks suddenly took off, bringing European shares up
and the euro," said Dan Cook, a senior market analyst at IG
Markets Inc in Chicago.
As with government debt, "the correlation with equities is
very strong," Cook said. "With any improvement in share prices
we also see a bit of a return to risk."
The euro <EUR=> gained 0.49 percent at $1.2996.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.29 percent at 86.246.
Against the yen, the dollar <JPY=> fell 0.79 percent at 97.87.
Steep losses in gilts after British Finance Minister
Alistair Darling announced record government borrowing for
2009/10 in his budget statement weighed on German bunds.
With little in the way of economic data, Treasury auctions
or Federal Reserve debt purchases, bond investors looked to
equities for direction.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32 in price to yield 2.94 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 2/32 in price to yield 0.97 percent.
U.S. Energy Information Administration data showed a 3.9
million barrel rise in crude oil stocks last week, more than
the 2.6 million barrel rise analysts had forecast. []
Gasoline and distillate stocks also rose unexpectedly.
"It's pretty ugly," said Tom Bentz, senior commodity
analyst at BNP Paribas Commodity Futures. "Inventories keep
building and we have too much of everything."
U.S. light sweet crude oil <CLc1> fell 33 cents to $48.22 a
barrel.
Spot gold prices <XAU=> rose $7.00 to $889.25 an ounce.
Overnight in Asia, stocks in Japan and South Korea rose,
but most regional markets slipped as caution spread until
further clarity could be reached on the banking industry.
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> was up 0.5 percent, while Japan's Nikkei share
average <> rose 0.2 percent.
(Reporting by Leah Schnurr, Vivianne Rodrigues and Chris Reese
in New York and Atul Prakash, Jane Merriman and Ian Chua in
London; Writing by Herbert Lash; Editing by James Dalgleish)
