* Global shares advance on banking sector outlook
* Euro rebounds after breaking through resistance levels
* Oil settles above $74 on expected inventory drop
* Bonds fall as safe-haven bid eases on stock rally
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 7 (Reuters) - Global stocks rallied on
Wednesday after State Street Corp brightened the outlook for
corporate earnings, while oil prices snapped a six-day slide on
expectations U.S. crude inventories have fallen.
The bullish earnings forecast by State Street <STT.N>, the
world's second-largest custodian bank, lifted banking shares on
both sides of the Atlantic and boosted Wall Street about 3
percent. For details see:[]
Shares of State Street jumped 10 percent after it forecast
second-quarter operating earnings would climb 29 percent more
than analysts' expectations. Banks rebounded from recent heavy
losses, driving the KBW bank index <.BKX> up 5.5 percent.
Investors also scooped up industrials and technology stocks
that have been beaten down recently, while higher crude prices
boosted stocks in the energy sector.
"The reason why yesterday's rally fizzled was because we
lacked solid leadership. Today, that is earnings," said Marc
Pado, U.S. market strategist at Cantor Fitzgerald & Co in San
Francisco.
"There is some confidence now that there will be more
positive surprises than negative during the earnings season."
MSCI's all-country world equity index <.MIWD00000PUS> rose
1.6 percent, but its emerging market index <.MSCIEF> barely
climbed out the red, rising 0.05 percent.
The Dow Jones industrial average <> closed up 274.66
points, or 2.82 percent, at 10,018.28. The Standard & Poor's
500 Index <.SPX> rose 32.21 points, or 3.13 percent, at
1,060.27. The Nasdaq Composite Index <> gained 65.59
points, or 3.13 percent, at 2,159.47.
European shares reversed early losses in response to the
State Street outlook and gained on optimism stress tests
planned for banks in the euro zone and other countries might
not be as bad as initially feared. []
Europe named 91 banks taking part in a probe into the
health of its banking system -- including many regional banks
where markets suspect most of the sore spots -- as authorities
seek to restore confidence in the sector. []
The FTSEurofirst 300 <> index of top European shares
rose 1.5 percent to close at 1,006.01 points, capping a 4.1
percent rise over the past two sessions.
Oil rebounded, lifted by hopes of a strong earnings season
and expectations that data to be released later Wednesday and
on Thursday will show a drop in U.S. crude inventories.
[]
U.S. crude <CLc1> settled up $2.09, or 2.9 percent, at
$74.07 a barrel, its biggest percentage gain since June 25.
ICE Brent crude futures <LCOc1> were up $2.06 at $73.51.
The rally in stocks drew investors into riskier assets and
away from safe-haven government debt. U.S. Treasuries slid and
Bund futures shed earlier gains to settle lower after the State
Street outlook improved overall risk appetite.
The benchmark 10-year U.S. Treasury note <US10YT=RR> traded
down 16/32 in price to yield 2.99 percent, up from 2.94 percent
late Tuesday.
Bund futures <FGBLc1> hit a session low of 129.12 as
equities turned higher, but trading volumes were thin ahead of
the European Central Bank's monthly meeting on Thursday.
"Bonds fell because U.S. and global investors appear to
have more appetite for risk," said Lloyd McAdams, chairman and
chief investment officer of Santa Monica-based Pacific Income
Advisers, with $4.5 billion in assets under management.
The euro rose against the dollar in a late-day reversal in
technical trading after breaking through resistance levels,
which prompted some investors who had bet against the single
currency to buy to prevent losses. []
Concerns about the growth outlook for the global economy
and plans to test the financial health of European banks had
weighed on the euro for most of the session.
The euro <EUR=> was up 0.16 percent at $1.2643.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.24 percent at 83.88.
Against the yen, the dollar <JPY=> was up 0.17 percent at
87.70.
Gold futures <GCQ0> for August delivery finished $3.80
higher at $1,198.90 an ounce in New York. []
Copper ended higher, reversing earlier losses and extending
a bounce from last week's two-week low, with the help of a
weaker dollar and the rally in equities. []
Asian stocks slipped as investors worried that global
growth was faltering, with the MSCI index of Asia Pacific
shares outside Japan <.MIAPJ0000PUS> shedding 0.5 percent.
Japan's Nikkei average <> ended down 0.6 percent.
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog click on http://blogs.reuters.com/hedgehub)
(Reporting by Edward Krudy, Vivianne Rodrigues, Richard Leong
in New York; Ian Chua, Ikuko Kurahone, Brian Gorman and Rebekah
Curtis in London; writing by Herbert Lash; editing by Andrew
Hay)
