Stocks in the United States rallied on Friday in their best day for two weeks.
Shares of Lehman Brothers Holdings Inc ended up 5% after the Korea Development Bank said the investment bank was a possible acquisition target.
Lehman is among the US banks whose business has been battered by mounting losses due to a housing slump in the United States.
Lehman's stock has lost nearly 80% of its value this year and the investment bank has taken $7 billion in write-downs.
Lehman's stock rose 5% to $US14.41 on the New York Stock Exchange. It started the year at $US65.44.
Comments by Buffet & Bernanke
Earlier, investor Warren Buffett said in an interview on CNBC television that stocks are more attractive now than a year ago.
Mr Buffett also said he expects the US government to take action to support troubled home loan financiers, Fannie Mae and Freddie Mac.
Federal Reserve Chairman Ben Bernanke also helped when he said at an annual symposium in Jackson Hole, Wyoming, that the slide in oil prices and a firmer dollar should curb inflation.
The Dow Jones industrial average shot up 197.85 points, or 1.73%, to 11,628.06. Standard & Poor's 500 Index rose 14.48 points, or 1.13%, to 1,292.20. The Nasdaq Composite Index climbed 34.33 points, or 1.44%, to 2,414.71.
Oil prices for US crude fell on Friday by $US6.59, or 5.4%, to settle at $US114.59 per barrel.
Trading volume was low on the New York Stock Exchange, with only about 888.62 million shares changing hands - well below last year's estimated daily average of roughly 1.90 billion. About 1.39 billion shares were traded on the Nasdaq, also below last year's daily average of 2.17 billion.
European stocks up
European stocks ended sharply higher on Friday, lifted by a rebound in financial shares on the prospect that US investment bank Lehman Brothers might be bought.
The pan-European FTSEurofirst 300 index ended up 1.8% at 1,175.79.
Around Europe: Germany's DAX index rose 1.7% and France's CAC 40 added 2.2%. The Swiss market index closed up 1.34%.
In Britain, the FTSE 100 was up 135.4 points, 2.5% at 5,506.6. The index gained 0.6% for the week but is still down 15% for the year.
NZ market down
The NZX 50 index was down 20 points to 3311 on turnover of $82 million.
Telecom was down 5 cents to $3.23, Contact Energy dropped 18c at $8.42 and Fletcher Building rose 4c at $7.20.
Michael Hill International was up 4c to 95c after saying it'll spend $7 m expanding into the US.
Fisher & Paykel Healthcare improved 13c after forecasting a 38%rise in first-half profit to the end of September.
Port of Tauranga was up 5c at $7.10 after saying it'll expand its container operation to meet steadily increasing demand for cargo.
Turners Auctions unchanged at 85c after its half year profit rose 55% to $812,000.
Auckland International Airport Ltd was unchanged at $2.01 after underlying profit rose 3% to $113m in the year to June on Thursday.
Mainfreight fell 2c to $7.10 after profit rose 40% to $8.2m in the June quarter.
New Zealand Oil & Gas rose 5c to $1.51 but The Warehouse was down 4c to $3.45.
In currency markets: the New Zealand dollar was trading at US71.87 cents, 81.73 Australian, 38.33 pence, 78.31 yen and 0.4831 euro. The Trade Weighted Index was at 66.54.
Australian market rises
The 200 index closed firmly in the black. It was up 56.2 points, or 1.15%, to 4,931.4, while the broader All Ordinaries gained 60.6 points, or 1.22%, to 5,010.2.
The September share price index futures contract was 58 points higher at 4,902 on volume of 21,409 contracts.