Dow Jones up 2%; oil rises to $73 a barrel

January 2009
M	T	W	T	F	S	S
« Dec
	1	2	3	4
5	6	7	8	9	10	11
12	13	14	15	16	17	18
19	20	21	22	23	24	25
26	27	28	29	30	31

(No Ratings Yet)

Loading ...

Posted on October 20th, 2008 by admin
Free Tools: Link Me ^(New)

Print This Post 130 views

LONDON: Stocks rose around the globe on Monday as efforts to shore up banks inspired investors to buy beaten-down shares and energy shares surged as oil rose on expectations that OPEC may act this week to boost prices.

US Federal Reserve Chairman Ben Bernanke raised hopes for more spending to help the economy, helping push key Wall Street indexes up.

European and Japanese stocks vaulted more than 3% higher. The dollar extended gains versus the yen after Bernanke’’s remarks. Underpinning the new-found relief, lending rates between banks — at the center of fears about the industry freezing up — fell significantly.

This suggested government efforts to provide support were finally bearing fruit. “This is unmitigated good news. However, the rates need to drop much further,” said T.J. Marta, fixed income strategist at RBC Capital Markets in New York.

London interbank offered rates, closely watched as a benchmark for the cost of financing throughout the private sector, fell for overnight dollars to a four-year low.

Perhaps more significantly, the three-month rate recorded its biggest drop since the Fed delivered an emergency interest rate cut last January.

A continued easing of financing for short-term loans for three months will take the pressure off companies, which have had to scramble for overnight cash as banks became reluctant to lend during the recent paralysis of credit markets. But unease over the economy continued to hang over some markets, and US government debt prices rose after Bernanke’’s gloomy economic outlook spurred a safe-haven bid for Treasuries.

On Wall Street the Dow industrials and SP 500 both rose more than 2%. Dow components Exxon Mobil and Chevron led the index higher after analysts at Oppenheimer Co raised recommendations on the companies, as well as a raft of other energy companies. The Dow Jones industrial average was up 183.91 points, or 2.08%, at 9,036.13. The Standard Poor’’s 500 Index was up 21.78 points, or 2.32%, at 962.33.

The Nasdaq Composite Index was up 18.87 points, or 1.10%, at 1,730.16. The SP energy index jumped 6.77%, with shares of both Exxon and Chevron rising over 6%. Shares of BlackBerry maker Research In Motion fell 8.9% on concerns about technology spending. In Europe, oil and bank shares drove gains. The FTSEurofirst index closed up 3.27%. Energy stocks were the top-weighted gainers on the FTSEurofirst 300, with BP and Royal Dutch Shell both soaring more than 10% and advancing 7.1% as crude prices rose.

Among banks, Royal Bank of Scotland added more than 23%, HSBC added 5.4% and Barclays put on more than 7%. European Central Bank President Jean-Claude Trichet added to the confidence-building over the weekend, pledging in a radio interview to do whatever it takes to restore confidence to financial markets. He said the ECB was working very closely with the US Federal Reserve to solve the financial crisis that has crippled equity markets for more than a year.

The benchmark 10-year US Treasury note was up 8/32, with the yield at 3.9029%. In Europe, benchmark bond futures were just a shade higher. Oil rose on expectations that OPEC may cut output this week to boost prices, which have fallen more than 50% in just three months from a record high above $147 a barrel. The president of OPEC, Chakib Khelil, said on Monday that non-OPEC producers like Russia, Norway and Mexico should contribute production cuts to help stabilize sagging prices. The gains in European and US stock markets also helped underpin crude. US light sweet crude oil rose $2.07 or 2.88%, to $73.92 per barrel.

Gold also gained on the back of bargain hunting as a 9% fall in prices last week and the recovery in oil prices helped boost buying. Spot gold prices rose $4.10, or 0.52%, to $785.80.

The dollar gained broadly, as reflected in its value against a basket of major currencies, which was up 0.87% at 83.185 from a previous session close of 82.466.

“This is more a story about flows. There is still some real money demand for dollars out there,” said Alan Ruskin, chief international strategist at RBS Global Banking in Greenwich, Connecticut.