* Global stocks soar on U.S. plan to corral credit crisis
* European stocks posts biggest rise on record
* U.S. dollar surges against yen as risk appetite returns
* Oil jumps on hope U.S. plan to restore market confidence
* Government debt ebbs as investors unwind safe-haven bets
(Recasts with opening of U.S. markets, adds byline; changes
dateline; previous LONDON)
By Herbert Lash
NEW YORK, Sept 19 (Reuters) - Global stocks rallied on
Friday, with European shares notching their biggest gain ever,
as a U.S. plan to unwind a deadly credit crisis bolstered
investor confidence and sent such safe-havens as bonds and gold
sharply lower.
The yen fell to a 10-day low against the dollar as U.S.
authorities moved to thaw seized-up credit markets that had
caused equities to tumble and had boosted risk aversion around
the world.
Gold futures in New York dropped 4 percent in heavy
profit-taking and the price of European and U.S. government
debt slumped after Washington said it was crafting a sweeping
program to tackle toxic bank assets that have choked the
financial system.
The stock rally added to sharp gains on Thursday, which had
marked the best day on Wall Street in six years. Europe's
leading share index surged 8.19 percent, its biggest one-day
percentage gain on record.
Financial stocks in the United States and Europe led the
charge. UBS <UBSN.VX> surged 31.66 percent, Barclays <BARC.L>
advanced 29.24 percent and HBOS <HBOS.L> jumped 28.91 percent
in Europe.
In the United States, Goldman Sachs <GS.N> gained 25
percent, Citigroup <C.N> jumped 24 percent, Merrill Lynch
<MER.N> rose 25 percent, Bank of America <BAC.N> soared 36
percent and Wachovia <WB.N> climbed 32 percent.
U.S. Treasury Secretary Henry Paulson called for the U.S.
government to spend hundreds of billions of dollars to take
toxic mortgage assets off the books of financial firms to
restore financial stability in battered capital markets.
Traders unwound safe-haven positions on hopes the measures
would be a watershed event to end the carnage that in two weeks
claimed two Wall Street icons, what had been the world's
biggest insurer, and two pillars of the U.S. housing finance
market.
"They are trying to create a kind of calm in the market
place and so far that's worked," said Tom Tucci, head
Treasuries trader with RBC Capital Markets in New York.
Before 1 p.m., the Dow Jones industrial average <> was
up 426.24 points, or 3.87 percent, at 11,445.93. The Standard &
Poor's 500 Index <.SPX> was up 52.80 points, or 4.38 percent,
at 1,259.31. The Nasdaq Composite Index <> was up 75.93
points, or 3.45 percent, at 2,275.03.
A temporary ban short-selling in financial stocks, in which
investors bet stocks will fall, and the U.S. government's plans
lifted European shares.
The FTSEurofirst 300 index <> closed up 87.16 points
at 1,150.78 points, after rising as high as 1,153.38. The index
has fallen 23.6 percent so far in 2008.
The UK Financial Services Authority on Thursday imposed a
temporary ban on short-selling financial stocks, while
short-selling of 799 U.S. financial stocks will be halted under
an emergency Securities and Exchange Commission order.
The dollar rose more than 3 percent versus the Japanese
yen, and the euro gained against the yen as the appetite for
risk returned.
The euro <EUR=> rose 0.46 percent at $1.4403. The dollar
fell against major currencies, with the U.S. Dollar Index
<.DXY> down 0.29 percent at 77.902. Against the yen, the dollar
<JPY=> rose 1.53 percent at 107.16.
The price of benchmark U.S. and euro zone government debt
dived, with short-dated euro zone government bond yields
notching their biggest daily jump in more than five years.
The two-year Schatz yield <EU2YT=RR> was last up 41.3 basis
points at 4.02 percent.
The price of 30-year U.S. Treasury debt fell more than 3
points and benchmark 10-year Treasury notes fell 2 full
points.
The 10-year U.S. Treasury note <US10YT=RR> fell 60/32 to
yield at 3.78 percent. The 30-year U.S. Treasury
bond<US30YT=RR> slid 91/32 to yield 4.37 percent.
"We have an unwind of the flight-to-safety bid. For the
time being we take the outlines of this (U.S.) plan as being
gospel and offering us comfort that we are perhaps reaching an
end game and a turning point," said Marc Ostwald, a bond
analyst at Monument Securities in London.
"Are we out of the woods yet? By no means," he said, noting
the U.S. Congress will have to approve the measures, which
might prove tricky before presidential elections in November.
Oil rose nearly $3 a barrel on expectations the U.S. plan
would help battered financial markets.
U.S. light sweet crude oil <CLc1> rose $2.92 to $100.80 a
barrel.
December gold futures <GCZ8> fell $37.20 at $859.80 an
ounce, but spot gold prices <XAU=> rose $12.70, or 1.50
percent, to $859.95 an ounce.
U.S. authorities tinkered with last-minute details to plans
to offload hundreds of billions of dollars of bad debt from
banks' balance sheets to ease investor fears that had put a
stranglehold on the global financial system in recent weeks.
U.S. securities regulators joined authorities from other
countries early Friday in temporarily banning short sales of
financial shares. In addition, the U.S. Treasury said it will
establish a program to guarantee money market fund holdings.
Asian shares jumped overnight, with Japan's Nikkei share
average <> up 3.8 percent, and MSCI's Asia-Pacific stock
index outside Japan <.MIAPJ0000PUS> up 5.9 percent.
(Reporting by Ellis Mnyandu, Steven C. Johnson, John Parry,
Lucia Mutikani and Gertrude Chavez-Dreyfuss in New York and
Matthew Robinson, Atul Prakash and Emelia Sithole-Matarise in
London and Sarah Marsh in Frankfurt; Writing by Herbert Lash;
Editing by Leslie Adler)
