* U.S. stocks manage gains, backed by banking shares
* KBW bank index <.BKX> closes at 16-month high
* FTSEurofirst 300 <> closes at seven-week high
* Yen falls on potential monetary easing measures
* Oil gains, gold falls
(Updates with closing U.S. markets, adds comment)
By Daniel Bases
NEW YORK, March 10 (Reuters) - Financial firms led U.S. and
European stock markets higher on Wednesday, with U.S. bank
shares hitting a 16-month peak, while gyrating crude oil prices
ended the day at an eight-week high.
Bank shares rallied on Wall Street amid bets an improving
economy will stoke loan demand. And European equities hit a
seven-week closing high, helped by positive U.S. economic
data.
In the currency markets the British pound weakened after
disappointing UK industrial production data, and the yen fell
against most major currencies on bets the Bank of Japan will
further ease monetary policy.
The U.S. dollar slumped against a basket of currencies,
falling 0.22 percent at 80.411 <.DXY>.
"The natural conclusion investors are making is, if the
economy is turning, financials are poised to do well," said
Angel Mata, managing director of listed equity trading at
Stifel Nicolaus in Baltimore.
On Wall Street, the Dow Jones industrial average <>
ended up just 2.95 points, or 0.03 percent, at 10,567.33, in a
late push into positive territory. The Standard & Poor's 500
Index <.SPX> rose 5.16 points, or 0.45 percent, at 1,145.61.
The Nasdaq Composite Index <> rallied for a fifth
consecutive day, climbing 18.27 points, or 0.78 percent, at
2,358.95.
The KBW bank index <.BKX> , a key gauge of U.S. bank
stocks, closed at its best level since November 2008, up 2.16
percent at 50.06. Citi group rose 3.7 percent and Wells Fargo &
Co <WFC.N> gained 2 percent.
U.S. data showing wholesale inventories fell unexpectedly
in January while sales hit their highest point in more than a
year also boosted sentiment.
"There's demand out there and (businesses) are going to
have to build up those inventories," Mata said.
Chip maker Intel Corp <INTC.O> shares gained 1.2 percent to
$21.19 and the PHLX semiconductor index <.SOXX> rose 2.16
percent to 358.04, its highest close since Jan. 13.
Oil shares ended mixed, while April crude oil <CLJO> prices
on the New York Mercantile Exchange settled up 60 cents, or
0.74 percent, at $82.09 a barrel. Prices briefly broke through
$83 a barrel before profit-taking parred gains.
World stocks measured in the MSCI All-Country World Index
<.MIWD00000PUS> gained 0.56 percent to 302.23, its best showing
in seven weeks, and up 66 percent from a low hit one year ago.
The pan-European FTSEurofirst 300 <> index closed up
up 0.59 percent at 1,058.81 points. Energy shares contributed
to gains, rising with crude prices during the European
session.
Japan's Nikkei stock index <> fell 0.04 percent while
China's Shanghai Composite index <> lost 0.66 percent,
pressured by concerns over possible monetary tightening ahead
of inflation data due later this week.
Spot gold prices <XAU=> fell $11.80, or 1.05 percent, to
$1107.90.
LEADERS
In the financials sector, some of the U.S. firms bailed out
by Washington staged a second day of gains. Short-covering was
cited as the reason for American International Group's 10.59
percent gain. For more, click on []
In Europe, banks rose with HSBC <HSBA.L>, Societe Generale
<SOGN.PA>, BNP Paribas <BNPP.PA>, UBS <UBSN.VX> and Deutsche
Bank <DBKGn.DE> up 0.4 to 2.7 percent.
Some mergers and acquisitions activity also helped
sentiment in the equity markets, including financials.
Private equity firm Apollo Management reached a deal to
acquire Citigroup Inc's <C.N> real estate investment division,
Bloomberg reported.
Abbott Laboratories <ABT.N> agreed to buy Facet Biotech
Corp <FACT.O>, which is jointly developing a multiple sclerosis
drug, for $27 a share, topping a failed bid from Biogen Idec
Inc <BIIB.O>. For details, see []
YEN AND POUND WEAKEN
The Japanese yen gave up recent gains from corporate
repatriation of offshore earnings amid increasing expectations
the Bank of Japan will further ease monetary policy. Sources
told Reuters that the Japanese central bank is leaning toward
easing monetary policy again next week. []
The euro rallied 0.9 percent against the yen <EURJPY=>
trading around 123.57. Against the yen the greenback rose 0.61
percent at 90.51 <JPY=> while the euro rose 0.40 percent to
$1.3654 <EUR=>.
The euro's gains were based more on yen weakness as the
euro zone currency still carries the specter of the unresolved
Greek debt crisis that limits buying enthusiasm.
Pressure has eased somewhat after Athens last week
announced more austerity measures and secured 5 billion euros
of debt funding from the market.
Sterling fell 0.14 percent to $1.4978. Britain's
manufacturing output slumped in January at its sharpest monthly
rate since last August. []
British Prime Minister Gordon Brown said in a speech at
Thomson Reuters in Canary Wharf in London that the economy was
growing, but the recovery was still in its early stages and
remained fragile.
Benchmark 10-year U.S. treasuries fell 4/32 of a point in
price, yielding 3.72 percent <US10YT=RR>.
(Additional reporting by Ryan Vlastelica, Nick Olivari,
Gertrude Chavez-Dreyfuss, Ellen Freilich in New York, Umesh
Desai in Hong Kong, Dominic Lau, Tamawa Desai, Atul Prakash and
George Matlock in London; Editing by Leslie Adler)
