* Stocks surge, led by financials, on Europe banking news
* Oil rebounds on stock surge despite gloomy economic data
* Bonds rise after weak manufacturing, confidence reports
* Dollar gains vs yen on stock rally, slowing flows to yen
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 31 (Reuters) - Oil and global stocks rose
on Tuesday as investors shrugged off a raft of gloomy economic
news and swelling crude inventories to drive major U.S. and
world equity indexes to their best monthly percentage gains
since at least 2002.
The U.S. dollar rose to a more than a three-week high
versus the yen as surging stocks worldwide and weak economic
data out of Japan dampened safe-haven flows into the Japanese
currency.
But U.S. government debt rose on weaker-than-expected data
on consumer confidence and manufacturing, while European
government debt rose on expectations record low inflation in
the euro zone could spur deep interest rate cuts.
Stock investors took heart from upbeat news from Europe
that bolstered financial shares and helped them to recover much
of Monday's losses as they continued a recent robust rally.
Financial shares rose on news that Barclays <BARC.L>
declined to take part in a British government asset protection
program while Belgium's Fortis <FOR.BR> outlined its future as
a viable insurance group following a hefty loss in 2008.
MSCI's all country world equity index <.MIWD00000PUS> rose
1.5 percent and was on course to post its biggest monthly rise,
at about 7.9 percent, in almost 10 years.
The Dow rose 7.7 percent and the broad S&P 500 added 8.5
percent in March, their best monthly percentage gains since
October 2002. But uncertainty about economy left the Dow down
13.3 percent and the S&P down 11.7 percent for the quarter.
"We rallied back from extremely oversold levels more than
anything," said Brian Daley, a trader at Conifer Securities in
New York.
"There are still a lot of question marks and a lot to be
seen in terms of how the fundamentals play out in the second
half and that's what I think investors are really going to
focus on," he said.
U.S. technology shares rose as Google <GOOG.O> gained 1.6
percent to $348.06 after the company and Walt Disney <DIS.N>
said they reached a pact to offer ad-supported channels on
YouTube. Shares of Disney added 1.74 percent to $18.16.
The Dow Jones industrial average <> closed up 178.01
points, or 2.37 percent, at 7,700.03. The Standard & Poor's 500
Index <.SPX> gained 19.45 points, or 2.47 percent, at 806.98.
The Nasdaq Composite Index <> climbed 42.97 points, or
2.86 percent, at 1,544.77.
Stocks were helped by money managers trying to spruce up
their portfolios at quarter's end, traders said.
"I think there's a little bit of buying in the marketplace
because the quarter has not been as bad as people had feared,"
Mark Bronzo, a portfolio manager at Security Global Advisors in
New York.
"Some people don't want to show as large a cash balance."
In London, the FTSE 100 <> index of leading British
shares rose 4.3 percent but ended the quarter down almost 11.5
percent, its worst first quarter since it was created in 1984.
The pan-European FTSEurofirst 300 <> index of top
regional shares rose 3.5 percent to close at 733.69 points.
But the rally in world equities belied various reports that
showed no signs of a bottom for a deep slide in world demand.
The Organization for Economic Cooperation and Development
said the economies of its 30 members would shrink 4.3 percent
in 2009 and shed 25 million jobs through 2010, underlying the
scale of the global downturn.
In the United States, a depressed housing sector, coupled
with dire employment prospects, kept consumer sentiment close
to rock bottom. The World Bank announced a $50 billion program
to counter a decline in global trade.
Rising U.S. stocks tempered the bid for safe-haven U.S.
government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
4/32 in price to yield 2.70 percent. The 2-year U.S. Treasury
note <US2YT=RR> gained 2/32 in price to yield 0.82 percent.
Oil rose 3 percent. U.S. crude <CLc1> rose $1.49 to settle
at $49.90 a barrel, rebounding from Monday's 7 percent slide.
London Brent crude <LCOc1> rose $1.24 to settle at $49.23.
The dollar rose against the yen as the end of Japan's
fiscal year and weak economic data spurred investors to deploy
funds abroad while the stock rally lifted the euro against the
dollar.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.39 percent at 85.414.
The euro <EUR=> rose 0.60 percent at $1.3285.Against the
yen, the dollar <JPY=> rose 1.84 percent at 99.08
Copper rose more than 4 percent, its largest quarterly gain
since 2006, as rallying equities and Chinese stockpiling
soothed concerns about the economy and demand.
"People are in a more positive state of mind on the
prospects of economic recovery at the end of the year," said
John Meyer, head of resources at Fairfax in London.
U.S. gold futures for June delivery <GCM9> settled up $7.30
at $925.00 an ounce in New York.
(Reporting by Leah Schnurr, Steven C. Johnson, Ellen Freilich
in New York and Emelia Sithole-Matarise, Paul Lauener, Brian
Gorman, Jon Hopkins and Pratima Desai in London; writing by
Herbert Lash; Editing by Dan Grebler)
