* 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
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Sept 19 (Reuters) - Global stocks surged in
record rallies and bond prices plunged on Friday after a U.S.
government move to cap a deadly credit crisis that has
decimated Wall Street heartened investors.
The U.S. rescue plans and bans on both sides of the
Atlantic to ban investments betting that financial stocks would
go lower lifted leading European shares to their biggest gain
ever and Britain's top index to its biggest daily rise in its
24-year history.
Euphoria was felt throughout world equity markets. The
benchmark S&P 500 index posted its best two-day rally since
October 21, 1987, and MSCI's emerging markets <.MSCIEF> index
jumped 9.97 percent, its biggest single-day rise in at least 10
years.
A late rally on Thursday and Friday's surge wiped out most
of the massive losses earlier in the week. The Dow closed down
about 0.3 percent for the week, while the S&P 500 closed up
about 0.1 percent. The Nasdaq rose 0.6 percent in the week.
The yen slid to a 10-day low against the dollar after U.S.
authorities moved to thaw seized-up credit markets that had
caused U.S. and European equities to tumble to three-year lows
this week and sharply boosted risk aversion around the world.
Gold futures in New York initially dropped 4 percent in
heavy profit-taking but spot prices rebounded almost 2 percent
as the dollar slipped sharply versus the euro and oil rallied
more than $7 a barrel at one point.
Oil capped its biggest three-day rally in a decade on
expectations the sweeping U.S. government rescue plan would
boost liquidity across the world's battered financial markets.
The price of European and U.S. government debt slumped
after Washington set in motion a plan to be approved by
Congress that would take the toxic mortgage assets that have
choked the financial system off banks' balance sheets.
"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.
The stock rally added to sharp gains on Thursday, which had
marked the best day on Wall Street in six years.
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 20.2
percent, Citigroup <C.N> jumped 22.7 percent, Merrill Lynch
<MER.N> rose 31.3 percent, Bank of America <BAC.N> soared 22.6
percent and Wachovia <WB.N> climbed 29.3 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.
The Dow Jones industrial average <> closed up 368.75
points, or 3.35 percent, at 11,388.44. The Standard & Poor's
500 Index <.SPX> gained 48.45 points, or 4.02 percent, at
1,254.96. The Nasdaq Composite Index <> advanced 74.80
points, or 3.40 percent, at 2,273.90.
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.
U.S. crude oil prices <CLc1> jumped $6.67 to settle at
$104.55 a barrel, bringing gains since Wednesday to 14.7
percent.
"This is tracking the recovery we've seen in the capital
markets across the board on the government bailout plan. The
liquidity has come back in and it is pushing us higher," said
John Kilduff, senior vice president at MF Global.
Spot gold prices <XAU=> rose $23.05 to $870.30 an ounce.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.65 percent at 77.62. Against the
yen, the dollar <JPY=> rose 1.53 percent at 107.16.
The euro <EUR=> rose 1.05 percent at $1.4487.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
66/32 to yield 3.81 percent. The 30-year U.S. Treasury bond
<US30YT=RR> shed 103/32 to yield at 4.39 percent.
"There's less fear, more liquidity, and the possibility
that the Federal Reserve might cut the federal funds rate seems
diminished so Treasury yields that hit almost rock bottom in
the last few days got back to where they were a couple of weeks
ago," said Stuart Hoffman, chief economist for PNC Financial
Services Group in Pittsburgh, Pennsylvania.
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, Richard
Valdmanis, 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)
