(Adds opening of U.S. markets, byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, March 18 (Reuters) - Global stocks rebounded on
Tuesday on relief over better-than-expected profit reports by
two Wall Street banks, but the dollar weakened ahead of a
Federal Reserve meeting where U.S. interest rates are likely to
be slashed.
U.S. and European stocks also jumped on hopes a Fed rate
cut would help ease a global credit crisis that on Sunday
claimed investment bank Bear Stearns, a fall that had caused
equity markets to tumble and investors to seek safe-haven
assets.
The Dow industrials on Tuesday jumped close to 300 points,
with all major U.S. stock indexes rising more than 2 percent.
In Europe, benchmark indexes closed up more than 3 percent.
Rises in financial shares drove gains on both sides of the
Atlantic.
Rising stocks sapped the safe-haven bid for government
debt, and oil prices rose on expectations a Fed rate cut will
further weaken the U.S. dollar and spur investor demand for
crude.
Gold pared gains after rising 1 percent on the weaker
dollar as investors waited for the Fed to establish a clearer
market direction. A Fed statement is expected after 2:15 p.m.
(1815 GMT).
Earnings from Goldman Sachs Group Inc's <GS.N> and Lehman
Brothers Holdings Inc <LEH.N> topped Wall Street estimates,
reassuring investors that U.S. financial companies are holding
up despite market turmoil caused by the subprime mortgage
crisis and a slowing U.S. economy.
"The numbers that came out on Goldman Sachs and Lehman,
while not great, seem to suggest that there could be light at
the end of the tunnel," said Matt Kaufler, portfolio manager
and analyst at Clover Capital Management in Rochester, New
York.
Expectations that regulators will ease restrictions on top
U.S. home financing companies Fannie Mae <FNM.N> and Freddie
Mac <FRE.N> and encourage them to boost spending in the
slumping U.S. housing market also helped ease investor
jitters.
Shares of Fannie were up 19.81 percent at $26.61, while
Freddie Mac shares were up 19.3 percent at $24.60.
The Dow Jones industrial average <> jumped 2.14 percent
to 12,228.78 and the Standard & Poor's 500 Index <.SPX> 2.60
percent, to 1,309.83. The Nasdaq Composite Index <> gained
2.27 percent to 2,226.38.
In Europe, banking stocks that have been hammered in recent
days also led the rebound, UBS <UBSN.VX> up 14.4 percent,
Credit Agricole <CAGR.PA> up 9.3 percent and Deutsche Bank
<DBKGn.DE> up 6.3 percent.
The FTSEurofirst 300 <> index of top European shares
closed up 3.38 percent at 1,240.30 points.
The strong rebound was echoed elsewhere in Europe:
Germany's DAX index <> rose 3.35 percent, UK's FTSE 100
index <> was up 3.41 percent and France's CAC 40 <>
gained 3.54 percent.
The FTSEurofirst 300 index is still down about 19 percent
so far this year, hit by worries over the credit crisis as well
as fears that the U.S. economy could tip into recession.
Most Asian stock markets closed higher, with MSCI's measure
of Asian stocks outside Japan <.MIASJ0000PUS> rising more than
1 percent. Hong Kong's main index <> climbed 1.4 percent
and Japan's Nikkei 225 <> closed up 1.5 percent.
RATE CUT EXPECTATIONS
Expectations of interest rate cuts deepened after JPMorgan
Chase <JPM.N> agreed to purchase stricken rival Bear Stearns
<BSC.N> for the fire sale price of $2 a share, and an emergency
Fed move on Sunday to cut its discount interest rate by a
quarter percentage point.
The dollar, which sold off on Monday, remained under
pressure, although it advanced against the yen as the results
at Goldman and Lehman eased investor concerns about the
"There were still fears lingering about possible liquidity
problems in banks such as Lehman Brothers. But given the bank
released better-than-expected results, in combination with
another solid report by Goldman, the dollar bounced back
against the yen," said Mark Meadows, a market strategist at
Tempus Consulting in Washington.
"But the rate decision later today is still weighing on the
greenback against most other currencies."
Oil rebounded. U.S. crude <CLc1> rose by $1.45 to $107.13 a
barrel, while London Brent was $2.29 higher at $104.04.
The U.S. oil contract hit a record high of $111.80 on
Monday before sliding more than 4 percent, the biggest one-day
percentage drop in more than seven months.
"If the Fed move results in further dollar weakness, it
should be very short-term bullish for oil," said Mike Wittner,
oil analyst at Societe Generale.
Gold pared earlier gains. Bullion <XAU=> rose as high as
$1,012.30 against $1,001.00/1,001.80 late in New York on
Monday.
U.S. benchmark 10-year Treasury notes traded a full point
lower and euro-zone government bond prices tumbled as Wall
Street rallied and inflation worries in Europe took the edge
off speculation about a near-term rate cut by the European
Central Bank.
Benchmark U.S. 10-year notes <US10YT=RR> were traded 1-2/32
lower in price to yield 3.43 percent from 3.30 percent late on
Monday. Two-year notes <US2YT=RR> were 9/32 lower in price for
a yield of 1.49 percent from 1.35 percent.
Investors in Europe were less sure about a rate cut by the
ECB after a media report that the bank was unlikely to cut
rates anytime soon.
The June Bund future <FGBLc1> was down 63 ticks on the day
at 117.60, after hitting a session low of 117.43.
Euribor interest rate futures were down as much as 12.5
ticks across the 2008 strip <FEIZ8>, handing back more than the
sharp gains made on Monday.
(Editing by Leslie Adler)
