World stocks on track to biggest gains since May

Written by Reuters | New York | Updated: Sep 28 2011, 05:45am hrs
Stocks on major world markets were headed for their largest daily gain in over four months on Tuesday, and oil and gold prices rallied too, as improving sentiment over the European debt crisis helped markets rebound from last weeks selloff.

The US dollar fell against the euro for a third straight day. US Treasuries prices also slipped, with 30-year bonds down by over two full points, as demand for safe-havens ebbed.

The market is beginning to get the feeling that finally European lawmakers are moving out of their paralysis, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

Commodity prices are up across the board. Theres hopes a global recession can be avoided. Talk of beefing up the euro zones bailout fund lifted stocks on Tuesday

Stocks rose for a third straight day. At the time of going to press (9:43 am EDT), Wall Streets Dow Jones industrial average was up 207.64 points, or 1.88%, at 11,251.50. The Standard & Poors 500 Index was up 20.91 points, or 1.80%, at 1,183.86. The Nasdaq Composite Index was up 36.55 points, or 1.45%, at 2,553.24.

The MSCI all-country world stock index was up 3.2%, on track to its largest daily gain since May 14. For the week thus far, the index is up 4.3%, after dropping more than 7.% last week. The broad-based rebound follows expectations built over the weekend from meetings of the International Monetary Fund in Washington DC , which signalled European policymakers were acting to contain Greeces debt problems and resolve a crisis threatening to engulf the world economy.

Some officials have said plans were underway to boost the size of a regional bailout fund to cut Greeces debts and recapitalize banks, although others have underlined they these were at a very early stage. Germany has also said there are no plans to increase the size of the fund.

Given so much uncertainty at the moment, there is room for both pessimism and optimism. The optimists have taken the forefront on hopes that we could see European politicians getting to grips with the current situation over the coming weeks, said Keith Bowman, analyst at Hargreaves Lansdown. But there are still a lot of concerns. Investors remain sceptical.

US crude oil jumped almost 4% to above $83 per barrel. The spot price of gold, which tracks bullion, rose 1.7% to above $1650 an ounce. Reuters