NEW YORK (Reuters) - Global stocks strode higher on Friday, capping their best week since a record surge last November, as optimism that ailing U.S. banks are on the mend eased investor fears and snuffed the safe-haven appeal of government debt and the dollar.
The price on benchmark 10-year U.S. Treasury notes fell late in the session as Wall Street trimmed earlier losses, curbing bids for less risky assets going into the weekend.
The dollar gave up gains as U.S. stocks rose further into positive territory, lifted by a Sanford C. Bernstein upgrade of Merck MRK.N and comments by Citigroup C.N late on Thursday that it did not need any more government aid.
The broker said Merck's takeover bid for Schering-Plough SGP.N was shrewd, helping lift drugmakers, while a Reuters interview with Citigroup Chairman Richard Parsons capped a week of news suggesting heavily battered banks are stabilizing.
The benchmark S&P 500 index jumped 10.7 percent this week, its third best weekly gain since World War Two. This week’s surge came after a new bear market low on March 6, and the record followed the previous low set in late November.
Stocks around the world as measured by MSCI's all-country stock index .MIWD00000PUS also posted their best week since late November, up about 8.4 percent for the week.
News this week that Citigroup, Bank of America and JPMorgan were all profitable in January and February boosted both U.S. and European banking shares.
“Financials have been continuing to push upwards following news from Citigroup and news that Bank of America is giving visibility for the rest of the year,” said Nomura strategist Philip Lawlor.
The Dow Jones industrial average .DJI closed up 53.92 points, or 0.75 percent, at 7,223.98. The Standard & Poor's 500 Index .SPX rose 5.81 points, or 0.77 percent, at 756.55. The Nasdaq Composite Index .IXIC added 5.40 points, or 0.38 percent, at 1,431.50.
European shares rose for a fourth straight day. The FTSEurofirst 300 .FTEU3 index of top European companies closed 0.8 percent higher at 702.12 points, its first close above 700 since the end of February.
Oil fell towards $46 a barrel as bearish forecasts for demand outweighed the potential for an agreement by members of the Organisation of Petroleum Exporting Countries to further production cuts at its meeting this Sunday.
An OPEC report released on Friday showed world oil demand contracting faster than expected, and the International Energy Agency lowered its oil demand forecast for 2009.
U.S. light crude for April delivery settled down 78 cents at $46.25. London Brent crude settled down 16 cents at $44.93.
Long-dated U.S. Treasury debt prices slipped, as more investors moved out of bonds and back into stocks.
Adding to the selling pressure on long-dated Treasuries were somewhat less gloomy data on the U.S. trade deficit and consumer sentiment, and remarks from Chinese Premier Wen Jiabao who voiced concerns about U.S. credit-worthiness.
“It’s a push-pull between risky and low-risk assets,” said Jason Brady, portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico.
The benchmark 10-year U.S. Treasury note fell 9/32 in price to yield 2.90 percent. The 2-year U.S. Treasury note rose 2/32 in price to yield 0.97 percent.
The dollar gave up gains against the euro in volatile trade as rising U.S. stocks prompted investors to take on more risk.
The dollar fell against a basket of major currencies, with the U.S. Dollar Index .DXY off 0.21 percent at 87.294. Against the yen, the dollar rose 0.29 percent at 98.04.
The euro rose 0.11 percent at $1.2923.
The day’s choppy session, without clear-cut conviction, suggested the bear market was far from over.
“Sentiment has turned in fits and starts,” said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
“All that is happening right now is a reality check and investors are asking whether this is really the bottom here.”
Peter Jankovskis, director of research at OakBrook Investments in Lisle, Illinois, said: “I really don’t think you’re going to see a true floor in this market until we get a comprehensive plan on the finance sector.”
Gold firmed on a combination of a weaker dollar, technical buying and fears that the Swiss move to weaken the franc on Thursday would lead to a series of currency devaluations, boosting investor demand for the yellow metal.
U.S. gold futures for April delivery settled up $6.10 at $930.10 an ounce in New York.
Reporting by Ellis Mnyandu, Nick Olivari, Edward McAllister and Burton Frierson in New York; Doug Palmer in Washington; Paul Lauener and Jan Harvey in London; and Marcin Grajewski in Brussels, Editing by Chizu Nomiyama
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