(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 1 (Reuters) - Global stocks surged about 3
percent and bond prices plunged on Tuesday as UBS and Lehman
Brothers moved to raise $19 billion in capital, signaling the
worst of an international credit crisis that has battered
markets for months may be over.
Oil fell for a third straight session as gains in the
dollar triggered a sell-off in commodity markets. The dollar
rebounded on better-than-expected U.S. manufacturing data and a
report showing U.S. chain store sales rose last week.
Stocks and the dollar were also helped by $23 billion in
additional write-downs by UBS and Deutsche Bank, which showed
the festering credit crisis is not limited to the United
States.
The revival of the financial sector was aided by signs that
U.S. Treasury Secretary Henry Paulson and central bankers are
considering radical strategies to boost liquidity in credit
markets that have been strained by fear of counter-party risk.
Shares of UBS <UBSN.VX> surged 12 percent on news it would
raise 15 billion francs ($15 billion) in a rights offering, and
the stock of Lehman Brothers Holdings Inc <LEH.N> jumped 18
percent after the investment bank it raised $4 billion in
capital.
The Lehman deal could boost its outstanding share count by
15 percent. But investors, hungry for positive news, viewed the
Lehman and UBS moves as helping to allay nagging investor
concerns about the hard-hit financial sector.
Goldman Sachs forecast global losses could top $1.2
trillion, including $460 billion in losses from U.S. banks,
brokers, hedge funds and government-sponsored home lenders.
"It's too early to say we're definitely through the worst
of this," said Leigh Goodwin, a bank analyst at Fox-Pitt,
Kelton. "But it would appear from the market's reaction today
to what UBS has done and from recent interest in buying
distressed assets, that maybe we can at least start to see the
end of the apparent freefall in certain asset values."
The Dow Jones industrial average <> jumped 391.47
points, or 3.19 percent, at 12,654.36. The Standard & Poor's
500 Index <.SPX> was up 47.44 points, or 3.59 percent, at
1,370.14, and the Nasdaq Composite Index <> gained 83.65
points, or 3.67 percent, to 2,362.75.
It was the best daily gain for U.S. stocks since March 18,
when the Federal Reserve cut interest rates.
European shares surged to their highest close in more than
a month amid hopes the worst of massive asset write-downs may
be over, sparking a rally in beaten-down banking shares.
The FTSEurofirst 300 <> index of top European shares
ended 3.2 percent higher, at 1,302.47 points, its highest close
since Feb. 29.
"The worst had been priced in, as the market seemed to have
expected a drop in bank profits worse than the one we saw in
2000-2002," said Francois Chevallier, strategist at VP Finance,
in Paris.
The European DJ Stoxx bank index <.SX7P> soared 5.6
percent, with Banco Santander <SAN.MC> up 4.6 percent, Societe
Generale <SOGN.PA> up 9.5 percent and Royal Bank of Scotland
<RBS.L> up 7 percent.
In Asia, the MSCI's measure of Asian stocks outside Japan
<.MIAPJ0000PUS> was flat by 0620 GMT, though it had gained
almost 1 percent at one point.
Japan's Nikkei average <> ended up 1 percent.
Markets got a further boost after U.S. manufacturing and
construction reports showed the sectors had contracted less
than expected. That raised hopes that the worst may soon be
over for an economy that many believe has entered recession.
U.S. government debt prices tumbled as investors favored
stocks over safe havens like cash and bonds. Treasuries, which
just came off their best quarter in 5-1/2 years, also lost
their luster after a March manufacturing report showed activity
was not as weak as expected.
The benchmark 10-year Treasury note's <US10YT=RR> price was
down 1-7/32 at 99-14/32. Its yield, which moves inversely with
its price, was 3.57 percent, up 16 basis points from Monday.
Two-year notes <US2YT=RR> were 12/32 lower in price for a
yield of 1.80 percent from 1.60 percent late on Monday.
Crude oil prices fell, with U.S. crude <CLc1> down 60 cents
at $100.98 a barrel, adding to losses of more than $4 from
Monday, when funds locked in commodity profits at the end of
the first quarter.
London Brent <LCOc1> fell 13 cents to $100.17 a barrel.
Gold tumbled to a two-month low below $880 an ounce as the
dollar's strength and de-leveraging amid the stock rally
triggered a sell-off in all precious metals.
Spot gold prices <XAU=> fell $30.20, or 3.30 percent, to
$885.10, after hitting a low of $872.90.
The precious metal has fallen about 15 percent since
hitting a record high of $1,030.80 two weeks ago.
The dollar's gains came as the euro and Swiss franc faced
headwinds from soft data showing German retail sales slowing,
as well as French, Italian, Spanish and Swiss manufacturing
dipping.
The dollar rose against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> up 1.09 percent
at 72.584 from a previous session close of 71.802.
The euro <EUR=> fell 1.13 percent to $1.5594 from a
previous session close of $1.5772. Against the Japanese yen,
the dollar <JPY=> was up 2.18 percent at 101.99, from a
previous session close of 99.810.
"We really had a big shift in sentiment over the last
day-and-a-half," said Boris Schlossberg, senior currency
strategist at DailyFX.com. "Euro/dollar has really come down
substantially and the reason is because the European data is
starting to display some signs of serious slowdown."
(Additional reporting by Nick Olivari, Caroline
Valetkevitch, Richard Leong, Frank Tang, Matthew Robinson and
Gene Ramos in New York; Editing by Dan Grebler)
