(Updates to close)
By Lynn Adler
NEW YORK, Jan 29 (Reuters) - Global stocks rose Tuesday on
investor optimism that a U.S. Federal Reserve rate cut will
help lift the U.S. economy, though bond prices slid on ideas
that stronger data will make the Fed less aggressive.
Stocks rose, along with the dollar, after reports on
durable goods orders and consumer confidence surpassed
forecasts. Bond prices closed lower after gaining recently in
anticipation of deep interest rate cuts.
The data countered the widely held view that the economy
was so weak the Fed would have to remedy it with aggressive
action at its two-day meeting that ends Wednesday.
Traders were fairly evenly split as to whether the central
bank would cut benchmark U.S. rates by 1/2-percentage point or
1/4 point in its two-day policy meeting that ends Wednesday.
Read more the shift in the Fed view at [].
The Dow Jones Industrial Average <> jumped 96 points on
expectations of another rate reduction after last week's
3/4-point rate cut, the largest in more than two decades, in an
emergency action from the Fed. Interest-rate sensitive shares
of banks, insurers and home builders rallied.
In another sign of potential U.S. economic stability, the
U.S. House of Representatives on Tuesday overwhelmingly
approved a $146 billion election-year economic stimulus plan
backed by President George W. Bush. The bill next goes to the
Senate, where there is an alternative plan. See details at
[].
European stocks ended higher on the U.S. rate cut
expectations and the view that the durable goods report did not
point to a recession.
The FTSEurofirst 300 index <> of top European shares
rose 1.6 percent, extending its rebound from last week's
two-year lows.
Shares of French bank Societe Generale <SOGN.PA>, slammed
last week after a massive loss it blamed on a rogue trader,
soared nearly 11 percent on market talk that rival bank BNP
Paribas <BNPP.PA> could initiate a takeover bid.
The MSCI main world equity index <.MIWD00000PUS> rose 1.09
percent, having hit its lowest since October 2006 last week.
Some traders were already looking beyond the Fed meeting to
the report of U.S. nonfarm payrolls for January, reported by
the Labor Department Friday.
"If we get a decent January jobs report, with upward
revisions to December, I think the recession and end-of the
world scenario gets shoved into an open elevator shaft," said
Michael Darda, chief economist at MKM Partners LLC in
Greenwich, Connecticut.
The economic data also underpinned the dollar versus the
euro and yen, but many investors were on the sidelines before
the Fed meeting's conclusion. Read more at [].
Easier monetary policy helps riskier assets such as stocks
but lowers the premium the dollar offers, making it less
attractive to hold the U.S. currency. A lower dollar in turn
makes it cheaper to buy gold.
U.S. gold and platinum futures fell Tuesday after setting
record highs overnight, as investors locked in profits before
the Federal Reserve's interest rate decision.
Oil rose on Tuesday as expectations of the Fed rate cut and
that OPEC would maintain output cuts offset concerns about a
U.S. recession. U.S. crude <CLc1> rose for the fourth straight
session, gaining 78 cents to $91.77 per barrel on the New York
Mercantile Exchange.
Treasury bond prices sank as stocks rose and on signs the
U.S. economy may not be as dire as previously predicted.
Benchmark 10-year notes <US10YT=RR> fell 21/32 in price,
lifting the yield to 3.66 percent from 3.58 percent late
Monday. Bond yields move inversely to price.
Although the size of the anticipated U.S. rate cut may now
be clouded, there is still consensus that the rates will drop.
"Certainly, it is not going to prevent the Fed from cutting
rates" on Wednesday, Scott Brown, chief economist at Raymond
James & Associates in St. Petersburg, Florida, said after the
durable goods report.
(Additional reporting by Ellis Mnyandu and Matt Robinson in
New York, Alister Bull and Glenn Somerville in Washington, D.C.
Editing by Richard Satran)
