(Updates with U.S. market close)
By Herbert Lash
NEW YORK, Feb 1 (Reuters) - U.S. stocks rose on Friday on
optimism over Microsoft Corp's <MSFT.O> $44.6 billion bid for
Yahoo Inc <YHOO.O> and European shares gained, lifted by
mining stocks, on the purchase of a stake in Rio Tinto.
The acquisition activity overshadowed a worsening U.S.
employment outlook that had earlier made markets stock
investors jittery. But the fresh signs of weakening U.S.
economic growth drove oil prices down 3 percent, eclipsing
OPEC's decision to maintain its output cuts.
The grim employment outlook also caused investors to bet
the Federal Reserve would cut interest rates further, pushing
U.S. government bond prices higher.
U.S. employers cut payrolls for the first time in four and
a half years in January, the government said on Friday.
"The Microsoft bid for Yahoo is keeping things buoyant,"
said Stephen Carl, principal and head of U.S. equity trading at
The Williams Capital Group in New York.
Microsoft's offer for Internet company Yahoo suggested
stocks were undervalued, and investors snapped up bellwethers
like General Electric Co <GE.N>, banks and energy service
companies.
The Yahoo deal would be the biggest Internet deal since the
Time Warner-AOL merger and seeks to bolster Microsoft against
an ever-more powerful Google Inc <GOOG.O>.
Chinese aluminum company Chinalco earlier announced it had
bought a 12 percent stake in miner Rio Tinto <RIO.L> jointly
with U.S. producer Alcoa <AA.N>. The news lifted mining stocks
in Europe, helping mask the impact of more bad news in the U.S.
economy.
The Dow Jones industrial average <> was up 92.83
points, or 0.73 percent, at 12,743.19. The Standard & Poor's
500 Index <.SPX> was up 16.86 points, or 1.22 percent, at
1,395.41. The Nasdaq Composite Index <> was up 23.50
points, or 0.98 percent, at 2,413.36.
The S&P and the Dow each marked their best weekly
performance since March 2003, with the S&P up 4.9 percent and
the Dow up 4.4 percent on the week. The Nasdaq had its best
week in nearly 18 months, rising 3.8 percent.
In Europe, the FTSEurofirst 300 <> index ended 1.83
percent higher at 1,353.91 points. Shares of French bank
Societe Generale <SOGN.PA> rose 5.5 percent on a newspaper
report that rival Credit Agricole <CAGR.PA> had hired Lazard
and its own investment bank, Calyon, to study a bid. Credit
Agricole denied comment.
Earlier, Japanese shares fell on Friday, hurt by worries
about the U.S. economy ahead of the the jobs data and as Sony
Corp <6758.T> shares slid after the maker of Playstation game
gear cut its profit forecast. The Nikkei 225 closed down 0.7
percent at 13,497.16 points.
Oil prices fell. OPEC ministers meeting in Vienna once
again rejected calls from consumer countries to pump more oil
amid worries that high fuel prices are adding to recessionary
pressures in the West.
U.S. crude <CLc1> lost $2.79 to settle at $88.96 a barrel,
dropping 3.04 percent. London Brent crude <LCOc1> fell $2.77 to
settle at $89.44.
The euro fell to $1.4805 <EUR=>, down 0.4 percent from late
Thursday, reversing course after touching a two-month high of
$1.4952 earlier in the session, according to Reuters data.
Sterling steadily fell throughout the New York session and
was last down 1 percent to $1.9680 <GBP=>.
The dollar was unchanged on the day at 106.30 yen <JPY=>,
continuing to move in lock-step with equity markets.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
2/32, with the yield at 3.5889 percent.
"These numbers will probably keep the Fed on an
accommodative track," said David Coard, head of fixed-income
sales at Williams Capital Group, of the employment data. "This
is bullish for Treasuries."
(Additional reporting by Ellis Mnyandu, Burton Frierson,
Richard Valdmanis, Matthew Robinson and Steven C. Johnson in
New York; Editing by Leslie Adler)
