17 Jul 2008

Wall Street rallies on banks, lower oil price

10:36 am on 17 July 2008

Stocks in the United States jumped more than 2% on Wednesday after strong results at Wells Fargo fueled a powerful rally in the battered banking sector and an unexpected leap in US crude supplies led oil prices to fally sharply.

Spot gold prices tumbled about 2% as crude oil slid for a second day, and the US dollar extended gains after Federal Reserve chairman Ben Bernanke said that under certain conditions currency intervention may be warranted.

Minutes from the Fed's June meeting showed policymakers believed the next interest rate move could be an increase, which also lifted the dollar.

Driving the stock market rally was a surge in banks, which have suffered a terrible year, as results from Wells Fargo, the fifth-largest bank in the US, eased investor fears about mortgage losses. The sector has absorbed more than $US400 billion of write-downs and credit losses since the global credit crisis began last year.

Wall Street's three major indexes posted their biggest one-day percentage gains since 1 April. The Dow Jones industrial average rose 276.74 points, or 2.52%, to 11,239.28. The Standard & Poor's 500 Index gained 30.43 points, or 2.50%, to 1,245.34. The Nasdaq Composite Index added 69.14 points, or 3.12%, at 2,284.85.

US crude oil futures fell 3% or $US4.14 to settle at $US134.60 a barrel. London Brent crude fell $US2.56 to $US136.19 a barrel.

Britain and Europe

Britain's top share index closed 0.4% down near three-year lows, as weaker oils and mining stocks on sliding commodity prices weighed on banks that turned positive on easing worries about their health.

The FTSE 100 index was down 21.3 points at 5,150.6 after trading as much as 1.95% lower earlier in the session. The index has lost more than 20% so far this year.

In Europe, shares ended higher as falling oil prices supported the broader market, a stronger dollar underpinned automotive stocks and solid results from Wells Fargo lifted battered banks.

The FTSEurofirst 300 index of top European shares closed 0.53% higher at 1,115.97 points, having fallen as much as 1.6% earlier.

In Germany, the DAX index ended at 6155.37 points, up 73.67 or 1.21%, while France's CAC-40 index closed at 4112.45 points, up 51.3 or 1.26%.

The Swiss market index closed at 6583.49 points, up 21.51 or 0.33% and in Italy, the All Share Mibtel index closed at 20923 points, up 87 or 0.42%.