* 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 close)
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 more 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 214.33 points,
or 2.6 percent, to 8,426.74. The Standard & Poor's 500 Index
<.SPX> gained 29.72 points, or 3.4 percent, to 907.24. The
Nasdaq Composite Index <> climbed 44.36 points, or 2.6
percent, to 1,763.56.
Bank stocks, and Citigroup Inc <C.N> in particular, were
the impetus for the day's upward momentum as investors
anticipate Thursday's 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 7.7
percent on the day after Bloomberg reported Citi may not need
additional government money but rather may raise capital from
private investors. []
Bank of America <BAC.N>, another Dow and S&P 500 component,
being tested soared 19.3 percent.
The broad S&P 500 has now gone positive for the year and is
above the 900 level for the first time since January, spurred
by optimism on the economy and financial system.
BOEING LIFTS OFF
Boeing Co <BA.N> helped lift the Dow, with shares rising
2.4 percent, after it said its 787 Dreamliner would be ready
for its first flight in the second quarter. []
Gains in benchmark indexes extended after U.S. 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.
Asian stocks earlier jumped to a seven-month peak on
Monday, fueled 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 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 5.2 percent to its highest 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 AND DOLLAR FLAIL
Longer-dated U.S. Treasury debt prices were flat to
slightly higher, with benchmark yields hovering at five-month
highs after the Federal Reserve bought a bigger-than-expected
$8.5 billion of longer-dated government debt. The purchase was
the largest since the Fed -- the U.S. central bank -- began
buying Treasuries in March.
The U.S. 10-year Treasury note <US10YT=RR> fell 1/32 in
price, while its yield rose to 3.17 percent from 3.16 percent
late on Friday.
The dollar fell against the euro on the rise in risk
tolerance and stock market gains. The euro <EUR=> was last up 1
percent at $1.3403. The dollar was at 98.94 yen <JPY=>, down
0.1 percent on the day.
U.S. June crude futures <CLc1> rose $1.22 to $53.59 a
barrel on the New York Mercantile Exchange as optimism about
the economic recovery spilled into most markets.
(Reporting by Reuters bureaux worldwide; Writing by Nick
Olivari; Editing by James Dalgleish)
