Oil jumps, dollar slumps on U.S. Election Day

By Herbert Lash

NEW YORK (Reuters) - Oil jumped more than 10 percent and gold shot higher after investors dumped the U.S. dollar on Tuesday in favor of commodities and stocks, relieved that the Election Day ends the uncertainty over who will be the next American president.

The U.S. dollar slumped in its biggest one-day drop against a basket of currencies in 13 years as investors bet interest rate cut around the world, typically a boost for the U.S. currency, will stimulate growth and ease the global financial crisis.

U.S. and European shares surged as commodity stocks tracked rising crude oil and metals, and investors brushed aside more dire U.S. economic data as they awaited to see whether Barack Obama or John McCain would be the next U.S. president.

New orders received by U.S. factories tumbled for a second straight month in September, dropping 2.5 percent to a seasonally adjusted $432 billion, a Commerce Department report said. Economists were expecting a 0.8 percent decline.

The Dow rose more than 3.0 percent and the broad S&P 500 gained more than 4.0 percent, tracking a similar rise in European shares. The S&P closed above the 1,000 mark for the first time since October 13.

It was the largest Election Day rally ever in the United States, a market holiday before 1984.

"I think the election is overriding everything. It seems to be on everybody's mind, so even though any economic number at this point is important, the thing is we have a bigger story," Joe Saluzzi, co-manager trading at Themis Trading in Chatham, New Jersey.

The Dow Jones industrial average .DJI closed up 303.38 points, or 3.26 percent, at 9,623.21. The Standard & Poor's 500 Index .SPX was up 38.95 points, or 4.03 percent, at 1,005.25. The Nasdaq Composite Index .IXIC was up 53.55 points, or 3.10 percent, at 1,779.88.

Oil giants Chevron (CVX.N) and Exxon Mobil (XOM.N), along with commodities-related Caterpillar (CAT.N) provided the biggest lift to the Dow. Chevron rose 6.1 percent, Exxon gained 4.3 percent and Caterpillar jumped 8.3 percent.

Economic bellwether General Electric (GE.N) rose 7.6 percent after The Wall Street Journal reported the U.S. Treasury Department may use part of a $700 billion rescue package to buy stakes in a wide range of financial companies, such as GE Capital.

Strong earnings at MasterCard Inc (MA.N) and Archer Daniels Midland Co (ADM.N) bolstered optimism about consumer spending and corporate pricing power despite the stalled economy.

Speculation of aggressive cuts in interest rates also lifted the spirits of investors.

The European Central Bank and the Bank of England are expected to cut interest rates this week after Australia's slashed rates more deeply than forecast.

The FTSEurofirst 300 .FTEU3 index of top European shares closed up 4.3 percent at 974.15 points, its sixth straight day of gains. But the benchmark is down 35.4 percent this year.

BP (BP.L) rose 4.9 percent, Royal Dutch Shell (RDSa.L) gained 6.7 percent and gas producer BG Group (BG.L) jumped 8.4 percent.