(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, Feb 26 (Reuters) - U.S. stocks rose on Tuesday on
news of a $15 billion buyback plan from IBM and on remarks by a
Federal Reserve top official that the weak economy is a bigger
worry than inflation, while upbeat bank results drove European
shares higher.
Crude oil surged past $100 a barrel in the U.S. and set a
record price in London, lifting the shares of oil companies and
helping push all three major U.S. stock indexes up more than 1
percent.
Oil drew support from cold weather in Europe and the United
States, as well as the view from the president of the
Organization of Petroleum Exporting Countries that the group
will not raise output at its meeting next week.
The vice chairman of the Federal Reserve, Donald Kohn,
speaking in North Carolina, said the danger the U.S. economy
will weaken further is a bigger worry than higher inflation.
His comments suggested the Fed will cut interest rates further,
pushing the dollar to extend losses.
U.S. stocks moved higher after International Business
Machines Corp <IBM.N> announced its buyback program, offsetting
dire U.S. economic data that pointed to a sharp jump in
inflation, a plunge in consumer confidence and more bad news
from the beleaguered housing market.
"The market is looking for positives. IBM's a big component
of the market, it's a large weighting, that combined with Ambac
and the move late yesterday is giving short-term direction in
the market," said Mark Schlarbaum trader, Global Capital
Management Conshohocken, Pennsylvania.
The Dow Jones industrial average <> was up 124.06
points, or 0.99 percent, at 12,694.28. The Standard & Poor's
500 Index <.SPX> was up 10.99 points, or 0.80 percent, at
1,382.79. The Nasdaq Composite Index <> was up 21.59
points, or 0.93 percent, at 2,349.07.
U.S. stocks had rallied on Monday on signs that No. 2 bond
insurer Ambac <ABK.N> and its bigger rival, MBIA Inc. <MBI.N>
would stabilize.
Financial stocks drove European shares up on Tuesday after
Standard Chartered <STAN.L> delivered upbeat results, but the
outlook for the U.S. economy remained a concern.
The FTSEurofirst 300 index <> ended up 1.41 percent
at 1,361.18 points, close to its day's high. Advancing issues
outnumbered decliners by about 4.4 to one.
But U.S. data did not augur well for future consumer
spending -- the engine of U.S. economic growth.
"In general, the fundamental picture is still not that
encouraging so we must place a big question mark on the
durability of the current upswing," said UniCredit analyst
Gerhard Schwarz.
Japanese stocks gave up early gains to end lower on
Tuesday, going into reverse after scoring a six-week closing
high the previous day, with mobile carrier KDDI Corp <9433.T>
hurt by a ratings downgrade.
The Nikkei average <> fell 0.7 percent or 89.85 points
to end at 13,824.72, after jumping more than 3 percent on
Monday.
Global bank HSBC Holdings Plc <0005.HK> led Hong Kong blue
chips up nearly 2 percent on signs the world's largest bond
insurers would stabilize, easing concerns about
subprime-related losses at the biggest banks.
In currency markets, the dollar extended losses after the
remarks by the Fed's Kohn.
Kohn said in a speech at the University of North Carolina
at Wilmington that he did not expect recent elevated inflation
rates to persist.
"In my view, the adverse dynamics of the financial markets
and the economy have presented the greater threat to economic
welfare in the United States," Kohn said.
The euro rose to a session high of $1.4914 <EUR=>, versus
$1.4902 before Kohn's comments. Against the yen, the dollar
fell to 107.60 yen <JPY=>, a decline of 0.4 percent on the
day.
Brent crude set a record high near $100 a barrel on
Tuesday, supported by cold weather in Europe and the United
States and expectations that OPEC will not raise output at a
meeting next week.
By 1708 GMT, Brent <LCOc1> rose as high as $99.67 a barrel,
a gain of $1.98.
Euro zone government bond prices slipped, pushing
shorter-dated yields to a three-week peak as investors mulled
the timing of European Central Bank interest rate cuts after
upbeat German sentiment data.
The February Ifo index rose to 104.1 from 103.4 the prior
month, beating analysts' forecasts and easing concerns about
health of the euro zone's biggest economy.
Gold bounced back in Europe on Tuesday on a weaker dollar
after falling more than 1 percent on possible gold sales by the
International Monetary Fund.
Silver hit a 27-year high as investors considered the metal
relatively cheap against other precious metals, analysts said.
The United States said on Monday it supported the sale of a
limited portion of the IMF's gold stocks and was confident
Congress would support the move. The U.S. Treasury had earlier
resisted seeking Congressional approval. []
Spot gold <XAU=> fell as low as $926.40 an ounce before
rising to a high of $943.80. It was quoted at $941.40/942.30 at
1612 GMT, against $937.80/938.60 in New York on Monday and off
last week's record high of $953.60.
(Additional reporting by Cal Mankowski, Kevin Plumberg,
Robert Gibbons and Lucia Mutikani in New York, Atul Prakash and
Amanda Cooper in London; Editing by Leslie Adler)
