* U.S., European shares surge on rising oil, industrials
* Markets eye more global rate cuts, U.S. election outcome
* Credit thaw weakens bid for short-term government debt
* Oil jumps on signs Saudis make substantial output cuts
* Three-month dollar Libor slips to lowest since June 9
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Nov 4 (Reuters) - U.S. and European shares rose
sharply on Tuesday as commodity stocks tracked a surge in the
price of crude oil and industrial metals on a day Americans
headed to the polls to elect a new president.
Crude jumped more than 11 percent to about $71 a barrel on
signs Saudi Arabia had made substantial cuts in oil supplies,
while copper rallied more than 8.1 percent and gold prices
strode higher, all helped by a weaker dollar.
The dollar fell against most major currencies and U.S.
Treasury debt prices were little changed in thin volume.
Investors brushed aside more dire news about the U.S.
economy as they awaited to see whether Barack Obama or John
McCain had won the U.S. presidential election.
New orders received by U.S. factories tumbled for a second
straight month in September, dropping 2.5 percent to a
seasonally adjusted $432 billion, a Commerce Department report
said. Economists were expecting a 0.8 percent decline.
"The numbers are truly dismal," said Peter Kenny, managing
director of Knight Equity Markets in Jersey City, New Jersey.
"And yet not capable of quelling the excitement of knowing
we will have a new president elected today. Dismal as they are,
today's momentum is for the upside."
Economic bellwether General Electric <GE.N> was the biggest
boost on the Dow, rising more than 8 percent. The Wall Street
Journal reported the U.S. Treasury Department may use part of
its $700 billion rescue package to buy stakes in a wide range
of financial companies, such as GE Capital.
Strong earnings from MasterCard Inc <MA.N> and Archer
Daniels Midland Co <ADM.N> also improved optimism about
consumer spending and pricing power despite the stalled
economy.
"There's a somewhat widespread belief that we may have seen
the worst in the stock market in early October," said Hugh
Johnson, chief investment officer of Johnson Illington Advisors
in Albany, New York.
At 1 p.m., the Dow Jones industrial average <> was up
265.79 points, or 2.85 percent, at 9,585.62. The Standard &
Poor's 500 Index <.SPX> was up 33.97 points, or 3.52 percent,
at 1,000.27. The Nasdaq Composite Index <> was up 51.34
points, or 2.97 percent, at 1,777.67.
Dow components Alcoa Inc <AA.N> rose 5 percent, Chevron
<CVX.N> 6 percent and Exxon Mobil <XOM.N> 4 percent.
European shares jumped more than 4 percent.
Speculation of aggressive cuts in interest rates lifted the
spirits of investors.
The European Central Bank and the Bank of England are
expected to cut interest rates this week after Australia's
slashed rates more deeply than forecast.
The FTSEurofirst 300 <> index of top European shares
closed up 4.3 percent at 974.15 points, its sixth straight day
of gains. But the benchmark is down 35.4 percent this year.
BP <BP.L> rose 4.9 percent, Royal Dutch Shell <RDSa.L>
gained 6.7 percent and gas producer BG Group <BG.L> jumped 8.4
percent.
Banking shares rose on hopes the financial sector jitters
may ease, sending Societe General <SOGN.PA> up 11.2 percent and
HBOS <HBOS.L> 10.6 percent.
The rate at which banks lend dollar funds to each other
fell, pushing benchmark three-month borrowing costs to their
lowest in five months.
The London interbank offered rates for three-month dollar
funds at the British Bankers' Association's daily fixing was
2.70625 percent <USD3MFSR=>, marking the 17th consecutive daily
decline and the lowest level since June 9.
Longer-dated euro-zone government bond prices rose as
investors mulled a potentially chunky ECB rate cut this week,
and U.S. short-term Treasuries dipped as climbing stocks cut
off any safe-haven buying.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
9/32 in price to yield 3.88 percent, while the 2-year U.S.
Treasury note <US2YT=RR> fell 1/32 in price to yield 1.46
percent.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 2.04 percent at 84.639.
Against the yen, the dollar <JPY=> was up 1.13 percent at
100.25 while the euro <EUR=> rose 2.75 percent at $1.2988.
Oil rose after one source estimated Saudi Arabia, the
world's biggest oil exporter, has reduced exports by around
900,000 barrels per day from a peak in August.
U.S. light sweet crude oil <CLc1> rose $6.53 to $70.44 a
barrel.
Gold rose on a weaker dollar, with investors keeping a
close eye on the currency ahead of the U.S. election.
Spot gold prices <XAU=> rose $37.40 to $759.30 an ounce.
A win by Obama, who led McCain in most polls, would be
marginally better for the dollar because the Democrats already
control Congress, analysts say.
"The U.S. election might have an impact on the euro/dollar
and so indirectly would have an impact on gold as well," said
Eugen Weinberg, an analyst at Commerzbank.
Japan's Nikkei index <.225> ended the day up 6.3 percent
after a holiday on Monday, but Asia-Pacific stocks traded
outside Japan slipped 0.8 percent, according to an MSCI index
<.MIAPJ0000PUS>.
(Reporting by Leah Schnurr, Chris Reese, Nick Olivari and
Edward McAllister in New York and Atul Prakash, Jamie McGeever
and Emelia Sithole-Matarise in London; writing by Herbert Lash;
Editing by Tom Hals)
