* U.S. stocks rise on bank stress test, economic optimism
* Asia stocks hit 7-month high, powered by Taiwan surge
* Dollar and yen dip on reduced safe-haven bid
(Updates with U.S. market activity, changes dateline, previous
HONG KONG)
By Nick Olivari
NEW YORK, May 4 (Reuters) - U.S. stocks rose on Monday,
mirroring gains elsewhere in the world, as investors bet the
U.S. government's stress tests won't be that bad for banks.
Positive U.S. economic data showing pending sales of
existing homes rose in March added to investor optimism, though
a rise in risk tolerance pushed U.S. bonds and the dollar lower
on a drop in safe haven bids. For details, see
[].
Optimism about an economic recovery was global and across
most asset classes other than gold, with crude oil futures also
buoyant in New York trade.
There's the feeling "we're going to see some positive news
out of the banks, that there's a chance they'll be able to
raise capital beyond the government converting their preferred
shares," said Jack Ablin, chief investment officer at Harris
Private Bank in Chicago.
The Dow Jones industrial average <> rose 162.24 points,
or 2 percent, to 8,374.65. The Standard & Poor's 500 Index
<.SPX> gained 17.73 points, or 2 percent, to 895.25. The Nasdaq
Composite Index <> climbed 26.65 points, or 1.6 percent,
to 1,745.80.
Bank stocks, and Citigroup Inc. <C.N> in particular, were
the impetus for the day's upward momentum as investors
anticipate the Thursday release of results of the stress
tests.
The government has assessed 19 major U.S. financial
institutions to ensure they have sufficient capital to
withstand the recession, with investors expecting banks will
have to raise $150 billion or more in fresh capital.
Shares in Citigroup, a Dow and S&P component, jumped 4.7
percent on the day after Bloomberg reported Citi may not need
additional government money but rather may raise capital from
private investors. []
The broad S&P 500 is now up more than 32 percent from early
March's bear market low, spurred by optimism on the economy and
financial system.
BOEING LIFTS OFF
Boeing Co <BA.N> helped lift the Dow, with shares rising
0.7 percent, after it said its 787 Dreamliner would be ready
for its first flight in the second quarter. [].
Gains in benchmark indexes extended after data showed
construction spending rose in March and pending home sales
increased more than anticipated.
European stocks were higher in thin trade amid hopes the
economic slump may be bottoming out. UK markets were closed for
a holiday but the FTSEurofirst 300 <> index of European
shares rose 1.6 percent to 842.70 points.
Asian stocks earlier jumped to a seven-month peak on
Monday, fuelled by confidence in a global recovery and a jump
in Taiwanese stocks. Taiwan's benchmark TAIEX index has gained
12.8 percent in two days as investors see a wide-reaching deal
in 2009 that would spark Chinese investment in the island.
The surge in Taiwan added to the broad gains across Asia
after a gauge of Chinese manufacturing rebounded to a
nine-month high in April.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> was up 5 percent to its highest level since
October and taking its two-month rally to 45 percent from the
low hit in early March.
"We have China's PMI data, which seems to signal continued
recovery for the economy, yet another reason to stay bullish,"
said Castor Pang, strategist with Sun Hung Kai Financial in
Hong Kong.
Japanese financial markets were closed on Monday for the
Golden Week break.
U.S. BOND PRICES DROP, DOLLAR FLAILS
U.S. Treasury debt prices fell on Monday with benchmark
yields hovering near five-month highs after the rise on Wall
Street and cutback in safe-haven buying. Treasury debt prices
later trimmed losses after the Federal Reserve bought a
bigger-than-expected amount of longer-dated government
securities.
The U.S. 10-year Treasury note <2USYT=RR> fell 2/32 to
96-16/32, while its yield rose to 3.17 percent from 3.16
percent on Friday.
The dollar was little changed against the yen but fell
against the euro on the rise in risk tolerance and stock market
gains. The euro <EUR=> was last up 0.8 percent at $1.3377. The
dollar was at 99.05 yen <JPY=>.
U.S. June crude futures <CLc1> rose 40 cents to $53.59 a
barrel on the New York Mercantile Exchange as optimism about
the economic recovery spilled into most markets.
Gold investors took the opposite view to other assets, with
the yellow metal rising 1.8 percent for June delivery <GCM9> on
pent-up buying ahead of uncertainty over the stress tests,
traders said.
(Reporting by Reuters bureaux worldwide, writing by Nick
Olivari in New York; Editing by Kenneth Barry)
