* Pfizer-Wyeth deal fuels stock optimism about valuations
* Gold shoots above $900 an ounce on safe-haven buying
* Glimmer of housing market hope batters government debt
* Oil prices steady as OPEC supply cut speculation holds
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Jan 26 (Reuters) - U.S. and European shares rose
on Monday as a $68 billion pharmaceutical takeover and a bright
spot in U.S. housing data spurred investors' optimism while oil
prices rose on speculation supply cuts were taking hold.
Britain's Barclays <BARC.L> added to the positive tone
after it said it did not need to raise fresh capital, sending
its battered shares soaring 73 percent and helping a recovery
in other financial shares on both sides of the Atlantic.
Longer-dated U.S. and euro zone government debt prices
fell, weighed by persistent concerns about the amount of new
issuance to flood markets this year to fund financial sector
bailouts and stimulus packages.
In a sign of those concerns, gold climbed above $900 an
ounce, the highest level in more than three months.
The lifting of gloom from equity markets overcame more bad
news on the jobs front after more than 70,000 layoffs were
announced by global corporate icons including Philips <PHG.AS>,
ING <ING.AS> and Caterpillar <CAT.N>.
The International Monetary Fund slashed its forecast for
2009 global growth to 0.5 percent from 2.2 percent in its
previous economic outlook in November, a source told Reuters.
But Pfizer Inc's <PFE.N> proposed takeover of U.S. rival
Wyeth <WYE.N> opened the possibility of more deals ahead,
analysts said, as companies seek to position themselves
defensively in the midst of faltering global economies.
"Deals of this quality and this magnitude will rekindle
enthusiasm and hope about equity markets," said Andre Bakhos,
president of Princeton Financial Group in New Brunswick, New
Jersey.
Shares of Pfizer, the world's largest drugmaker, fell 9.5
percent and Wyeth shares rose 0.55 percent.
Shortly after 1 p.m., the Dow Jones industrial average
<> was up 103.78 points, or 1.28 percent, at 8,181.34. The
Standard & Poor's 500 Index <.SPX> was up 13.95 points, or 1.68
percent, at 845.90. The Nasdaq Composite Index <> was up
25.58 points, or 1.73 percent, at 1,502.87.
"Any kind of M&A is a positive and is seen as marking the
beginning of the light at the end of the tunnel," said Alan
Lancz, president of Alan B. Lancz & Associates Inc, an
investment advisory firm in Toledo, Ohio.
"You're going to see a lot of deals in health care. It's
cheap. Even in the utilities sector there's a lot of deals
waiting to happen."
Financial stocks in Europe surged, driving the FTSEurofirst
300 <> index of leading European shares 3.2 percent
higher at 784.66 points. The index had fallen in 12 of the
previous 13 sessions.
Among other European banks, Lloyds <LLOY.L> jumped 32
percent, ING <ING.AS> gained 28 percent and Royal Bank of
Scotland <RBS.L> added 19.8 percent.
Among U.S. banking shares, Bank of America <BAC.N> gained 7
percent and JPMorgan Chase & Co <JPM.N> rose 4.9 percent. The
S&P financial index <.GSPF> rose 1.65 percent.
Worries about a deepening global slowdown and ongoing
turmoil in the financial sector have proven enormous hurdles
for investors to overcome in January, a month that often sets
the tone for the rest of the year.
Shares of Caterpillar Inc <CAT.N>, however, fell more than
9 percent after the heavy equipment maker forecast earnings in
2009 would drop significantly from last year. The company also
said it would shed about 20,000 workers as it grapples with
fallout from the economic turndown.
Sales of previously owned U.S. homes rebounded unexpectedly
in December, rising 6.5 percent, closing out a bleak year in
which prices dropped a record 15.3 percent, the National
Association of Realtors said.
The euro extended gains against the dollar to a one-week
high and the dollar rose against the yen after the U.S. housing
data.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> off 0.90 percent at 84.813.
The euro <EUR=> rose 1.04 percent at $1.3124, and against
the yen the dollar <JPY=> rose 0.47 percent at 89.23.
U.S. government bond prices were knocked lower on the home
sales data, as housing remains a key factor in the credit
crisis and the worst U.S. recession in decades.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
19/32 in price to yield 2.68 percent. The 30-year U.S. Treasury
bond <US30YT=RR> fell 62/32 in price to yield 3.41 percent.
"If we get any glimmer of hope in housing, that would be a
huge change," said Charlie Smith, chief investment officer of
Fort Pitt Capital Group in Greentree, Pennsylvania.
"If we can get clarity on the foreclosure aspect of this
number, that could be very bullish (for the economy) and
bearish for government bond prices," Smith added.
U.S. light sweet crude oil <CLc1> rose 5 cents to $46.52 a
barrel.
Spot gold prices <XAU=> rose $7.80 to $906.20 an ounce.
Japan's Nikkei average <> fell 0.8 percent to close at
its lowest level in almost three months. MSCI's index of
Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> rose 0.4
percent.
Many Asian markets were closed for the Lunar New Year,
while Australia and India were shut for national holidays.
(Reporting by Ellis Mnyandu, Steven C. Johnson, John Parry in
New York and Jane Merriman, Atul Prakash and Jan Harvey in
London; writing by Herbert Lash; Editing by Leslie Adler)
