* Global stocks rally as Citi lifts investor sentiment
* Dollar weakens as Citi news dampens safe-haven appeal
* Government debt slips on new supply wave, stock rally
* Crude falls on lowered forecast for world oil demand
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 10 (Reuters) - The U.S. dollar slipped and
world stocks rallied in their biggest single-day gain in three
months on Tuesday after a Citigroup memo saying the troubled
bank made a profit in January and February fueled the appetite
for risk.
The dollar slid across the board as the staff memo by Chief
Executive Vikram Pandit eased concerns about Citigroup's <C.N>
prospects and prompted investors to pare back safe-haven bids
on the greenback. For details, see
[][]
U.S. stocks also gained after U.S. Rep. Barney Frank said
he is hopeful that the New York Stock Exchange's uptick rule,
which slows the pace of short selling and could help calm
volatile markets, would be reimposed in about a month.
Gold fell more than 2.0 percent to below $900 an ounce
while U.S. and euro zone government debt prices dropped as the
rally in equity markets sapped any lingering safety bids.
[][]
"What really got the market going was the Vikram Pandit
memo from this morning," said Stephen Massocca, managing
director at Wedbush Morgan in San Francisco. "Any little hint
of good news and this market was going to take off."
MSCI's all-country world index <.MIWPOOOOOUS> jumped almost
5.0 percent, its biggest percentage gain in one session since a
5.7 percent rise on Dec. 8.
The rally in stock markets came even as the International
Monetary Fund warned that the world economy will likely
contract in a "Great Recession" this year [].
In further bleak news, European data suggested economic
growth will contract sharply in the first quarter as France,
Britain and Sweden reported precipitous falls in industrial
output, and German exports dived. []
Stock markets already were primed for sharp gains before
the Citigroup memo. Asian shares outside Japan posted their
best gains in a month, and the benchmark S&P 500 was at its
most oversold condition in five months when measured by its
50-day relative strength index, according to Reuters data.
"This is a market less sensitive to bad news and more
sensitive to good news," said Bob Parker, vice chairman of
asset management at Credit Suisse, in London.
The Dow Jones industrial average <> closed up 379.44
points, or 5.80 percent, at 6,926.49. The Standard & Poor's 500
Index <.SPX> surged 43.05 points, or 6.36 percent, at 719.58.
The Nasdaq Composite Index <> added 89.64 points, or 7.07
percent, at 1,358.28.
Shares of Citigroup, in which the government recently took
a large common equity stake to help shore up its battered
balance sheet, jumped 38 percent, pushing other banks higher.
The S&P financial index <.GSPF> and the KBW banks index
<.BKX> both gained 15.5 percent. Citigroup stock had fallen
about 80 percent year to date.
European shares, meanwhile, snapped a three-day losing run
to close higher, with banking stocks surging on the Citigroup
memo.
The pan-European FTSEurofirst 300 <> index of top
shares rose 5.1 percent to close at 690.89. points, the biggest
one-day percentage gain since Dec. 8.
The improvement in risk appetite spurred a bounce in the
euro, which rose to two-week highs versus the dollar. The yen
also rose versus the dollar, though doubts about the Japanese
currency's status as a safe port in the global economic storm
underpinned an overall defensive tone, traders said.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.71 percent at 88.661.
Against the yen, the dollar <JPY=> fell down 0.11 percent
at 98.68 and the euro <EUR=> rose 0.52 percent at $1.2676.
"We're seeing a general rebound in risk appetite given
improving stock performance," said Omer Esiner, senior market
analyst at Ruesch International in Washington.
"The Citigroup memo assuaged fears about the health of the
banking sector, undermining the dollar's safe-haven appeal. But
this could be all temporary and the market is just probably
booking profits on the dollar's recent gains," he added.
Oil fell nearly 3.0 percent a barrel as the U.S. Energy
Information Administration revised down its forecast for world
oil demand in 2009. []
"The EIA report certainly didn't help the market. All it
did was renew the concerns about demand," said Tom Bentz,
analyst at BNP Paribas Commodity Futures Inc.
U.S. crude <CLc1> settled down $1.36 at $45.71, having
risen earlier above $48. London Brent <LCOc1> settled down 17
cents at $43.96.
The benchmark 10-year U.S. Treasury note <US10YT=RR>
dropped 38/32 in price to yield 3.00 percent. The 2-year U.S.
Treasury note <US2YT=RR> fell 4/32 in price to yield 1.03
percent.
U.S. gold futures ended sharply lower, falling below $900
an ounce for the first time in a month, as the equity rally
lessened economic fears and prompted investors to switch funds
out of the safe-haven metal.
Gold for April delivery <GCJ9> settled down $22.10 at
$895.90 in New York.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 2.5 percent. But Japan's Nikkei average
<> dipped to a new 26-year closing low for the second
session in a row.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Pedro Nicolaci da Costa in New York and Brian Gorman, Alex
Lawler, Christopher Johnson and Jan Harvey in London; writing
by Herbert Lash; Editing by Leslie Adler)
