* Stocks rise on glimmer of hope in U.S. home sales data
* U.S. Treasury prices fall on huge new issuance concern
* US dollar falls after surprise jump in housing data
* Oil edges higher as OPEC signals further cuts to supply
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Feb 3 (Reuters) - A surprise rise in December
U.S. homes sales lifted stocks and eased safe haven demand for
the dollar on Tuesday, but U.S. government debt prices fell
sharply on renewed concerns over an expected surge in supply.
A sell-off in debt markets accelerated, driving up U.S.
Treasury bill yields to their highest levels since November, as
worries about the potential impact on inflation of at least $2
trillion in new debt this year unsettled investors.
Crude oil rose after the Organization of Petroleum
Exporting Countries signaled it might deepen its record output
cuts to help boost prices and drain bloated stockpiles.
U.S. stocks struggled through much of the session on fears
the government may increase its sway in the banking sector. But
news that Republican senators had proposed a $445 billion plan
to boost the ailing U.S. economy gave stocks another boost.
Michael James, a senior trader at regional investment bank
Wedbush Morgan in Los Angeles, said the Republican alternative
plan suggests some form of a bill will pass in Congress.
"There was some concern that we might not get a (stimulus)
bill passed a couple of days ago. That certainly added to the
market's big move at the end of the day," James said.
A 6.3 percent gain in December of pending U.S. home sales,
the first rise since August, boosted investors' enthusiasm and
offset a decline in bank shares on nationalization fears.
Bank of America Corp's <BAC.N> shares fell 11.7 percent,
while Citigroup Inc <C.N> fell 5.2 percent.
"Investors are betting on a nationalization of Citi and
BofA, which will force their stocks down to zero or close to
zero," said Tom Sowanick, chief investment officer at
Clearbrook Financial LLC in Princeton, New Jersey.
Solid results at drugmaker Merck <MRK.N> helped temper
worries amid an otherwise gloomy earnings season, while news
the U.S. Federal Reserve had extended agreements with other
central banks to meet dollar demand also boosted sentiment.
The Dow Jones industrial average <> rose 141.53 points,
or 1.78 percent, at 8,078.36. The Standard & Poor's 500 Index
<.SPX> gained 13.05 points, or 1.58 percent, at 838.49. The
Nasdaq Composite Index <> added 21.87 points, or 1.46
percent, at 1,516.30.
The FTSEurofirst 300 <> index of top European shares
closed 1.88 percent higher at 791.61 after having been down as
much as 0.9 percent. It fell 2.4 percent the previous session.
Vodafone <VOD.L>, the world's No. 1 mobile phone group by
sales, led telecoms higher in Europe after it raised its 2009
guidance on favorable foreign exchange movements and said
customers are using their mobiles more despite the downturn.
Slightly better-than-expected third-quarter revenue
forecasts at Vodafone lifted its shares about 7 percent.
Bond prices fell on worries about the size of new issuance
as the government dramatically boost its borrowing to fund a
ballooning budget gap and its economic rescue programs.
"It's justified about the inflation implication from the
amount of government debt coming," Lou Brien, market strategist
at DRW Trading in Chicago, said of the Treasury sell-off.
The benchmark 10-year U.S. Treasury note <US10YT=RR> shed
40/32 in price to yield 2.86 percent, while the 30-year U.S.
Treasury bond <US30YT=RR> fell 107/32 in price yield 3.65
percent.
U.S. light crude for March delivery <CLc1> rose 70 cents to
settle at $40.78 a barrel while London Brent <LCOc1> rose 26
cents to $44.27 a barrel.
Oil gains were encouraged by rising equity markets. OPEC
President Jose Botelho de Vasconcelos told Reuters the group
could take more action when it meets March 15.
"Prices do seem to have bottomed for now," said Kevin
Norrish of Barclays Capital. "OPEC has probably taken more than
enough off the market and there's a risk of over-tightening, in
which case prices would go back up fairly swiftly."
Gains in the euro were limited as many investors awaited
the ECB's policy-making meeting on Thursday, when it is widely
expected to leave interest rates on hold at 2 percent.
The euro <EUR=> rose 1.46 percent at $1.3037. against the
yen, the dollar <JPY=> fell 0.26 percent at 89.23.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 1.44 percent at 84.869.
Gold fell in choppy trade. U.S. gold futures for April
delivery <GCJ9> settled down $14.70 at $892.50 an ounce in New
York.
The MSCI index of stocks in Asia-Pacific excluding Japan
<.MIAPJ0000PUS> rose 1.2 percent. But Japan's Nikkei share
average <> fell 0.6 percent after rising as much as 2
percent, as fears about corporate results plagued investors.
(Reporting by Ellis Mnyandu, Richard Valdmanis, Vivianne
Rodrigues and Richard Leong in New York; George Matlock and Peg
Mackey in London and Christoph Steitz in Frankfurt; writing by
Herbert Lash)
