* US stocks jump after Wall Street's worst day in 20 years
* Dollar rises over 1 pct vs yen; U.S. stock futures rise
* Cautious optimism in markets despite bailout's rejection
* Bonds fall as hope of eventual bailout cut safety bids
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Sept 30 (Reuters) - U.S. stocks jumped on Monday,
a day after Wall Street's worst day in 20 years, as investors
voiced optimism Congress will eventually pass a plan to rescue
tainted banking assets, lifting the U.S. dollar and crude oil.
U.S. government debt prices slipped, paring Monday's
frantic charge for safe-haven investments. Oil rebounded more
than $2 a barrel toward $98 after nearly a 10 percent drop the
previous session as investors were less fearful of a major
meltdown in capital markets.
The dollar jumped as much as 1 percent against the yen
<JPY=> as cautious optimism for approval of a $700 billion plan
to bail out banks replaced the shock following Monday's
rejection by the U.S. Congress.
The dollar <JPY=> fell 0.45 percent at 105.49 against the
yen in recent trade.
"We're seeing dollar/yen bounce around as optimism ebbs and
flows about the U.S. bailout package, but we're not getting a
trend," Standard Bank currency analyst Steve Barrow said.
"Markets tend to move when we're pretty certain about
something. Here everyone's flying blind," he said.
U.S. stocks rose more than 2 percent, adding to investor
optimism after equity markets in Europe also posted solid
gains. The bailout's rejection in Congress buzzed nearly 9
percent off the broad S&P 500 <.SPX> on Monday.
Talk that U.S. lawmakers may reach some kind of agreement
by the end of the week and speculation that central banks could
slash interest rates tempted investors back into markets.
"A lot will hinge on the passage of a rescue plan, the
sooner the better. It remains an uncertainty in the market,"
said Kevin Mahn, chief investment officer at Hennion & Walsh
Inc in Parsippany, New Jersey.
U.S. President George W. Bush said the legislative process
on the bailout plan was not over and the economy depended on
"decisive action" from the government.
Shortly after the open, the Dow Jones industrial
average<> was up 189.80 points, or 1.83 percent, at
10,555.25. The Standard & Poor's 500 Index <.SPX> was up 24.42
points, or 2.21 percent, at 1,130.81. The Nasdaq Composite
Index <> was up 34.64 points, or 1.75 percent, at
2,018.37.
U.S government debt fell. The benchmark 10-year U.S.
Treasury note <US10YT=RR> fell 19/32 to yield 3.65 percent, and
the 2-year U.S. Treasury note <US2YT=RR> fell 7/32 to yield
1.73 percent.
The yield on one-month T-bills <US1MT=RR>, which investors
see almost as good as cash, dipped closer to zero percent in
early trading, a sign investors were still willing to earn
close to nothing in return for not losing their shirts.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 1.52 percent at 78.855.
The euro <EUR=> fell 1.7 percent at $1.4158.
One goal of the failed bailout was to thaw credit markets,
lower borrowing costs and unleash funds to banks, companies and
consumers. With a rescue plan in limbo, interest rates in the
interbank market soared, another sign all was still not well.
The yield on the London interbank offered rate (Libor) on
overnight dollar funds jumped the most in any day on record,
rising to 6.87 percent, according to Reuters data. It was the
highest Libor rate, which is a reference for trillions of
dollars of auto loans and corporate debt, in at least 7-1/2
years.
U.S. light sweet crude oil <CLc1> rose $1.71 to $98.08 a
barrel.
Spot gold prices <XAU=> rose $1.80 to $880.20 an ounce.
Asian stocks fell, chalking up the biggest monthly decline
in more than a decade, but didn't match the meltdown on Wall
Street. Japan's Nikkei share average <> closed down 4.1
percent to a three-year low, and the MSCI index of Asia-Pacific
stocks outside Japan <.MIAPJ0000PUS> fell 3.1 percent.
(Reporting by Ellis Mnyandu, Richard Leong in New York and
Jessica Mortimer and Alex Lawler in London; Writing by Herbert
Lash; Editing by Tom Hals)
