(Updates prices, adds details, quotes)
By Steven C. Johnson
NEW YORK, Jan 24 (Reuters) - Global stock markets posted
gains on Thursday, hoping that plans to rescue ailing bond
insurers and provide tax breaks to consumers would prevent new
credit losses and breathe fresh life into the U.S. economy.
Congress and the White House on Thursday agreed on the
details of a $150 billion economic stimulus package. U.S.
Speaker of the House of Representatives Nancy Pelosi said it
will include tax rebates for up to 117 million U.S. families.
"I think investors are encouraged they came up with an
agreement in principle, in quick fashion, and the speaker's
remarks were encouraging in that she said it was bipartisan,"
said Angel Mata, managing director of listed equity trading,
Stifel Nicolaus Capital Markets in Baltimore.
"When they started speaking, (the market) picked up
momentum ... whether it's momentum or short-covering or value
buyers, they're coming in," he said.
A surprise decline in the number of U.S. workers applying
for jobless benefits also induced optimism, dulling demand for
safe-haven government bonds, though claims of a massive trade
fraud at a major bank added to financial worries.
Oil futures rose above $89 a barrel <CLc1>, in tandem with
equities' rebound, while the dollar tumbled against the euro.
On Wall Street, the Dow Jones industrial average <> was
up 108.44 points, or 0.88 percent, at 12,378.61. The Standard &
Poor's 500 Index <.SPX> was up 13.55 points, or 1.01 percent,
at 1,352.15.
The Nasdaq Composite Index <> was up 33.32 points, or
1.44 percent, at 2,349.73, boosted by a 10.3 percent rise in
Qualcomm Inc <QCOM.O> shares a day after the mobile phone clip
maker posted a rise in quarterly profit.
Also lifting market spirits was news that New York's
insurance regulator had pressed major banks to put up billions
of dollars in an effort to rescue wobbly bond insurers.
Bond insurers guarantee the interest and principal on an
estimated $2.5 trillion of bonds. The debt they underwrite
shares the investment-grade ratings many of these firms carry,
so downgrades due to losses would drag debt ratings down as
well.
Analysts worry that this could force investors to dump
billions of dollars of municipal bonds, repackaged loans and
the like on to markets, sending borrowing costs soaring and
forcing more investor writedowns.
Talk of an insurance bailout lifted European shares on
Thursday, with the FTSEurofirst 300 <> up 5.4 percent.
Japan's benchmark Nikkei <> closed 2.1 percent higher.
"If these (insurance) guys would fail, it would be much
more catastrophic for banks' balance sheets and we would see
another round of writedowns," said Edmund Shing, strategist at
BNP Paribas in Paris.
Anxiety remained, however, with news of Societe Generale's
<SOGN.PA> admission that an "exceptional fraud" by one of its
traders would cost the group an estimated 4.9 billion euros
($7.1 billion). The alleged fraud would be one of the biggest
in financial history. []
SocGen also announced plans to raise 5.5 billion euros
through a capital increase to shore up its balance sheet.
SocGen shares were down 4.1 percent after an earlier trading
suspension was lifted.
In foreign exchange trading, the dollar eased 1.0 percent
against a basket of six major currencies to 75.635 from a
previous session close of 76.401 <.DXY>.
The euro rose 0.8 percent and traded at $1.4753 <EUR=> --
on track for a third straight session of gains -- after
European Cental Bank policy-maker Axel Weber said the ECB
remains focused on inflation risks, suggesting it is unlikely
to follow the Fed's lead and slash euro-zone rates. The euro
also rose 1 percent to 157.72 yen <EURJPY=>.
The dollar was up 0.1 percent at 106.90 yen <JPY=>, after
earlier slipping to 105.95 yen. Against the Swiss franc, the
dollar fell 0.4 percent to 1.0863 <CHF=>.
"They are consistently saying that (euro-zone) growth is
OK, there is going to be some effect from a U.S. slowdown, but
in their view, they are saying the economy is going to be
strong and (inflation) is going to be an issue," said Brian
Taylor, head currency trader at M&T Bank in Buffalo, New York.
In the government bond market, U.S. Treasury debt prices
were lower. The benchmark 10-year U.S. Treasury note
<US10YT=RR> traded down 19/32 in price, with the yield at
3.6739 percent.
The 2-year U.S. Treasury note <US2YT=RR> was down 9/32,
with the yield at 2.2847 percent. The 30-year U.S. Treasury
bond <US30YT=RR> was down 32/32, with the yield at 4.3712
percent.
European government bonds also fell on Thursday as
investors moved into stocks, though yields remained above
comparable U.S. debt. The 10-year Bund yield stood at 4.01
percent <EU10YT=RR> while two-year yields were at 3.48 percent
<EU2YT=RR>.
At 4 percent, benchmark interest rates in the euro zone are
now half a percentage point above U.S. rates, making European
debt more attractive to investors than U.S. paper.
(Additional reporting by Jeremy Gaunt, Eva Kuehnen and Randy
Fabi in London and Kristina Cooke, Lucia Mutikani and Richard
Leong in New York; editing by Gary Crosse)
