Leaders of the Group of 20 meet on Thursday and Friday in Pittsburgh and U.S. President Barack Obama said on Sunday he would push world leaders for a reshaping of the global economy in response to the crisis.

World stocks, measured by MSCI have risen over 26 percent this year, recouping more than half of last year’s losses, underpinned by repeated pledges by G20 policymakers to keep emergency support for the economy in place.

“The market might look slightly overbought near term, but the economy is definitely improving, corporate profits are definitely improving, interest rates are staying low, valuations aren’t expensive,” said Nick Nelson, European equity strategist at UBS. MSCI world equity index <.MIWD00000PUS> fell 0.7 percent, while the FTSEurofirst 300 index <.FTEU3> lost 0.6 percent.

Emerging stocks <.MSCIEF> also dropped 0.6 percent.

U.S. stock futures were down around 0.5 percent , paring losses after Dell said it would acquire Perot Systemsfor $3.9 billion. Perot System’s shares surged 66 percent in pre-market trading.

EXIT STRATEGY

The Fed is expected to keep its benchmark Fed Funds rate unchanged at 0.25 percent on Wednesday, and investors are looking for signs of how quickly it might remove its extraordinary programmes to revive lending and hiring.

While any signal that the Fed might start unwinding its loose monetary policy shows the central bank is acknowledging the recovery, it could be negative for risky assets as it could fan speculation of an interest rate hike.

The Fed has pledged to buy up to $1.45 trillion of mortgage-backed securities and debt issued by government sponsored Fannie Mae and Freddie Mac by end-2009.

Concerns about weak fuel demand pushed U.S. crude oil down 2.4 percent to $70.25 a barrel after Asia’s No.1 refiner Sinopec said that diesel China continued to lag economic recovery with fuel sales so far this year still below the rates seen a year ago.

The September bund future was steady, unable to take advantage of falling equities and investors grew concerned about the prospect of euro zone and U.S. debt supply.

The dollar <.DXY> rose 0.6 percent against a basket of major currencies, after hitting a one-year low last week, while the U.S. currency rose 1 percent to 92.21 yen .

“The yen may end up being the biggest winner against the dollar. It has yet to significantly overshoot against the dollar, unlike every other G10 currency. Real yields are moving in its favour and nominal yields versus the U.S. are negligible,” Deutsche Bank said in a note to clients.

“Dollar/yen will likely break below last year’s low of 87 and could even reach 80 over the next 3-6 months.”

Sterling fell to a five-month low of 90.79 pence per euro after the Bank of England said the British currency’s long-run sustainable exchange rate may have fallen due to an increased focus on Britain’s economic imbalances following the global credit crisis.

(Reuters Sept. 21)

U.S. crude for October delivery fell $1.39 to $68.57 a barrel by 1:32 p.m. EDT (1732 GMT).

London Brent crude dropped $1.38 to $68.27.

U.S. stocks dropped as investors’ confidence in the economic recovery wavered.

“The dollar is strengthening and equities are coming off hard so (oil futures) did the same,” said Tom Knight, trader at Truman Arnold in Texarkana, Texas.

Meanwhile, the U.S. dollar rose as the slide in the U.S. stocks boosted the currency’s safe-haven appeal.

Oil futures had risen earlier in the day as the market focused on a report showing a jump in U.S. manufacturing and pending home sales.

“It looks like the whole complex is failing to sustain the gains … basically, the market’s not done yet on the downside,” said Tom Bentz, senior commodity analyst, BNP Paribas Commodity Futures Inc in New York.

Oil has risen from a low of $32.40 in December, helped by economic recovery optimism that lifted global stocks <.MIWD00000PUS> to 10-month highs last month.

U.S. DATA

Oil traders will look for fresh direction from U.S. weekly crude stockpiles data.

Analysts expect the data to show a 600,000-barrel fall in U.S. crude stocks following an increase in refinery utilization, a preliminary Reuters poll of analysts showed.

The American Petroleum Institute (API) will release its weekly inventory report at 4:30 p.m. EDT (2030 GMT) on Tuesday. The U.S. Energy Information Administration (EIA) will release its data on Wednesday at 10:30 a.m. EDT.

Adding to already high inventories, OPEC has reduced its compliance with agreed production curbs, a Reuters survey on Tuesday found.

OPEC supply in August rose for a fourth consecutive month as Saudi Arabia, Nigeria and Venezuela increased their production, taking overall output discipline to 68 percent from a revised 70 percent in July.

The Organization of the Petroleum Exporting Countries meets on Sept. 9 in Vienna to reconsider its output policy.

Sept 1 (Reuters)

The U.S. dollar gained, retracing the week’s losses, as the durables goods report for July eroded risk appetite and prompted investors to seek shelter in the safe-haven greenback.

Orders for long-lasting manufactured goods registered the biggest advance since July 2007, but excluding transportation goods, orders for durables were slightly below expectations.

Slippage among global stocks that climbed to 10-month highs this week boosted money flows into less risky assets, such as European government bonds, which also gained from some modest month-end buying, traders said.

Economic data in Europe showed further signs of recovery, as did a report showing U.S. new home sales jumped in July to their fastest pace in 10 months.

But a key measure of U.S. business demand — nondefense capital goods, excluding aircraft — fell, reminding investors that the U.S. economy still faces huge challenges as it tries to emerge from deep recession.

Investors in equity markets took profits on a recent run-up in prices, and key commodity prices, such as copper, fell as the U.S. data cast doubt over the speed of economic recovery.

For example, the MSCI all-country world index rose for six straight session through Tuesday, gaining 5.3 percent over the stretch. The index was down 0.5 percent on Wednesday, but still up about 4 percent in August.

“The market has come a long way, and the economics are still supportive,” said Georgina Taylor, an equity strategist at Legal & General Investment Management.

“We’re just seeing a little profit taking. Nothing has been derailed. Housing data is improving. The only area of concern is consumer spending.”

In Britain, retreating mining and oil stocks outweighed modest gains from defensive pharmaceuticals, while energy shares were the biggest drag on a leading European index.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares fell 0.5 percent to close at 973.92. The index is still up more than 50 percent from its lifetime low of March 9.

U.S. stocks seesawed after market sell-offs on Monday and Tuesday led investors to turn skittish.

“Given how extended we are, and relatively overbought, sentiment is going to drive the market’s direction much more than any economic news, at least in the short term,” said Michael James, senior trader at Wedbush Morgan in Los Angeles.

Shortly after 1 p.m., the Dow Jones industrial average <.DJI> was down 4.24 points, or 0.04 percent, at 9,535.05. The Standard & Poor’s 500 Index <.SPX> was down 1.74 points, or 0.17 percent, at 1,026.26. The Nasdaq Composite Index <.IXIC> was down 6.60 points, or 0.33 percent, at 2,017.63.

Oil pared early gains to drop to almost $71 a barrel, extending losses from the previous session, on the rise in U.S. stockpiles of crude.

The U.S. Energy Information Administration (EIA), the statistical arm of the Department of Energy, reported on Wednesday that crude stocks in the world’s largest energy consumer rose by 200,000 barrels last week.

U.S. crude for October was down $1.00 at $71.05 a barrel, after falling $2.32 on Tuesday.

Brent crude fell 61 cents to $71.21 a barrel after losing $2.44 the previous day.

U.S. government debt prices fell. The benchmark 10-year note was down 4/32 in price to yield 3.45 percent.

Gold eased as the dollar recovered losses against the euro.

U.S. gold futures for December delivery in New York were down $1.00 at $945 an ounce.

The ICE Futures’ dollar index <.DXY> rose 0.6 percent to 78.723. The euro fell about 0.4 percent to $1.4235 .

Japan’s Nikkei share average closed up 1.4 percent <.N225> to a fresh 10-month high, while the MSCI index of Asia Pacific stocks traded outside Japan rose 0.3 percent.

Aug 26 (Reuters)

But an early rally in U.S. stocks faded about midday in New York after Treasuries rose as investors swooped in to take advantage of sharp losses on Friday.

Oil rose to a 10-month high near $75 a barrel and other commodities also surged as optimism that major economies were pulling out of recession drove hopes of rebounding demand. .

Global stocks as measured by MSCI’s all-country world index <.MIWD00000PUS> rose 1.2 percent and was on track for a fifth straight session of gains.

The yen fell while the U.S. dollar slid against commodity currencies, such as the Australian and New Zealand dollars, as investors became more comfortable with riskier trades given the upbeat assessment of the world economy.

“Economic data is in favor of a stronger recovery than expected. We can be quite bullish on risky assets,” said Romain Boscher, head of equity management at Groupama Asset Management.

Euro zone industrial new orders in June rebounded 3.1 percent month-on-month, or more than expected, the European Union statistics office Eurostat said.

In the United States, economic activity improved again in July from extremely weak levels earlier this year, suggesting the recession is waning, a report from the Federal Reserve Bank of Chicago showed.

In addition, China’s latest data for July indicated that while growth was moderating after a strong second quarter, the recovery remained on track to achieve the government’s goal of 8 percent growth for the full year.

“The Chinese news was good and we had some positive news out of Europe as well,” said Rob Montefusco, a trader at Sucden Financial in London. “Technicals are pointing upwards.”

But U.S. stocks pared earlier gains. About 1 p.m. (1300 GMT), the Dow Jones industrial average <.DJI> was up 15.34 points, or 0.16 percent, at 9,521.30. The Standard & Poor’s 500 Index <.SPX> was up 1.11 points, or 0.11 percent, at 1,027.24. The Nasdaq Composite Index <.IXIC> was down 1.49 points, or 0.07 percent, at 2,019.41.

European shares hit their highest closing level in nearly 10 months, boosted by banks and miners.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.9 percent up at 975.19 points, the highest closing level since early November.

Banks were among top gainers, with DJ STOXX banking index <.SX7P> rising 1.8 percent.

Japan’s Nikkei average <.N225> jumped 3.4 percent, booosted by hopes for a global recovery and lifted by camera maker Canon Inc <7751.T> and other exporters.

Investors increased their risk-taking in the wake of stronger-than-expected U.S. existing home sales data and upbeat comments from Federal Reserve Chairman Ben Bernanke.

Copper prices rose to their highest in more than a week, helped by strong investment demand and bets the economic crisis is petering out.

Jesper Dannesbee, a senior commodities strategist at Societe General, said real demand has not improved that much it but will improve gradually through the year.

“This is follow through from Friday. There is a general appetite for risky assets driven by cheap money and lax monetary policy,” Dannesbee said.

Gold edged below $950 an ounce, under pressure from a firmer dollar, but remained rangebound as support from higher oil prices and investor demand prevented it falling further.

Spot gold was at $949.80 per ounce

U.S. Treasury debt prices rose, with the 30-year bond gaining more than a full point, as investors did some bargain hunting after Friday’s sharp losses and after the Federal Reserve bought government debt.

The benchmark 10-year U.S. Treasury note was up 19/32 in price to yield about 3.49 percent.

Benchmark euro zone government bonds ended flat as data bolstered the recovery view, but caution on its sustainability eased the selling pressure.

“The stock market has been the barometer for growth and potential inflation,” said Troy Buckner, managing principal of NuWave Investment Management in Morristown, New Jersey. “And yes. it’s been an extreme correlation between equity market movements and commodities, especially copper, aluminum and crude oil.”

But Buckner said that prices have climbed “too far too fast,” leading his firm to short crude and heating oil, while reducing long positions in copper and aluminum.

Euro zone government bonds ended flat as economic data bolstered the view the global economic recovery is under way but caution about the recovery eased selling pressure. Investors worried whether new U.S. debt issuance this week would be welcomed by buyers.

U.S. crude rose 51 cents to $74.40 a barrel.

Aug 24 (Reuters)

Caution was the order of the day, with the dollar rising against the euro in a seesaw session in which risk tolerance rose and then fell as investors weighed the outlook for growth and corporate earnings.

Data showed orders in Germany, Europe’s largest economy, rose at the strongest monthly pace in nearly two years in May. But economists said the yearly comparison would remain weak for some time.

Euro zone government bond prices fell and the Bund future retreated from seven-week peaks as heavy European supply of almost 14 billion euro cut safety bids for bonds.

Another decline on Wall Street rekindled a safety bid for U.S. government debt, offsetting worries about demand for this week’s sale of $73 billion in bonds.

Tumbling energy shares dragged down European and U.S. equity markets as oil fell more than 2 percent, pressured by investors’ caution over recovery and an expected increase in gasoline stocks during the heart of the U.S. driving season.

Exxon Mobil Corp fell 1.7 percent and Chevron Corp dropped 1.3 percent in U.S. trading, while Royal Dutch Shellshed 0.75 percent and Total lost 1.2 percent in Europe.

“The markets are in a consolidation mode,” said Andrew Bell, head of research at Rensburg Sheppards. “To propel the markets higher, we have got to see evidence of the turning point in earnings and of the recovery and economic growth moving from less bad to a little bit better.”

At 1:30 p.m. EDT (1730 GMT), the Dow Jones industrial average was down 67.41 points, or 0.81 percent, at 8,257.46. The Standard & Poor’s 500 Index was off 6.44 points, or 0.72 percent, at 892.28. The Nasdaq Composite Index lost 18.77 points, or 1.05 percent, at 1,768.63.

Disappointing UK industrial output data pulled shares lower in London, with utilities among top European decliners.

The FTSEurofirst 300  index of top European shares closed 0.8 percent lower at 826.36 points. The FTSE 100 closed down 7.91 points at 4,817, a fresh two-month low.

British manufacturing output unexpectedly fell 0.5 percent in May, official data showed, making it less likely the economy returned to growth in the second quarter.

Copper prices turned negative as concerns over demand and world growth persisted. Copper for three-months delivery in London traded at $4,930 a tonne.

Gold erased earlier gains to trade near break-even as the dollar recovered lost ground against a basket of currencies, reducing the precious metal’s appeal as an alternative asset.

Spot gold prices rose 20 cents to $924.20 an ounce and the U.S. Dollar Index  was up 0.25 percent at 80.584.

The euro was down 0.23 percent at $1.3942, while against the yen, the dollar fell 0.56 percent to 94.83.

An expected increase in U.S. gasoline stocks for the week ended July 3, ahead of the long U.S. Independence Day holiday weekend, pressured oil.

“Consumer confidence is weighed down by higher retail prices and rising unemployment and so the number of Americans taking to the road over the holiday weekend was probably lower than last year,” said Harry Tchilinguirian, senior oil analyst with BNP Paribas.

The benchmark interbank cost of borrowing euros fell to a new low on Tuesday as a banking system flush with funds remained reluctant to lend money into the real economy.

The benchmark 10-year U.S. Treasury note was up 11/32 in price to yield 3.47 percent. The 2-year U.S. Treasury note was little changed, yielding 0.94 percent.

Asian stocks edged up slightly but struggled, with the MSCI index of Asia-Pacific shares outside Japan rising 0.4 percent. Japan’s Nikkei share average <.N225> dipped 0.3 percent as a stronger yen hit exporter shares.

NEW YORK, July 7 (Reuters)

U.S. crude pricesraced above $71 a barrel, extending a 2 percent gain the day before, after rebel attacks on Nigerian oil facilities disrupted supply. Firmer oil prices supported metal prices, with gold edging above $940 to a one-week high.

Global equities were also in demand, with the MSCI world equity index advancing 0.9 percent and the pan-European FTSEurofirst 300 up 0.2 percent.

The MSCI world equity index is up more than 21 percent this quarter, on track for the biggest quarterly gain in its 20-year history.

“It is clear that the rebound in global equity markets has lost some steam,” Barclays Wealth said in a note.

“It appears to us that stocks are now broadly fairly valued, having erased their previous undervaluation faster than expected. Further share price gains may well relate more closely to the rate of underlying profit growth and the economic cycle.”

U.S. stock index futures were down between 0.2 and 0.3 percent, indicating a softer open on Wall Street.

Tokyo’s Nikkei average added 0.8 percent, shrugging off a record 1.1 percent fall in consumer prices in the year to May — another sign falling demand is pushing the economy deep into its second spell of deflation this decade.

“Most people will agree now that we won’t revisit the low point that we have seen this year any time soon,” said Luc Van Hecka, chief economist at KBC Securities.

“But there are still some problems to be resolved in the financial sector and as long as that is not out of the way in a convincing manner, we could still have intermediate corrections.”

UBS , the world’s largest wealth manager, said it planned to raise about 3.8 billion Swiss francs ($3.46 billion) by selling stock and expected to post a second-quarter net loss. The likelihood of a long road to global economic recovery remained a challenge to companies. Boeing Co , the world’s No. 2 plane-maker, suffered another heavy blow to its Dreamliner project when a major customer, Australia’s Qantas Airways , scrapped and deferred orders for 30 new planes.

DOLLAR SLIPS

The dollar fell against a basket of currencies, extending losses made the previous day after the U.S. Federal Reserve gave no hint of an imminent exit from low interest rates and other bold measures to stoke growth.

The euro was up 0.6 percent against the dollar at $1.4085, while the greenback fell 0.5 percent to the yen.

“Risk sentiment is back in full force,” said Christian Lawrence, currency strategist at RBC Capital Markets. “The dollar is being sold across the board.”

Yields on the benchmark 10-year U.S. Treasury added 2 basis points, while the 10-year euro zone benchmarkbund yield was unchanged at 3.428 percent.

In one measure of how investor sentiment has improved, the CBOE Volatility Index, a gauge of investor anxiety, on Thursday closed at its lowest level since just before Lehman Brothers filed for bankruptcy protection last September.

LONDON, June 26 (Reuters)

Spot gold touched a high of $946.90 in London — last seen in mid-June — up from $938.55 quoted late on Thursday in New York. The metal stood at $946.65 by 1134 GMT.

Global stocks rallied while the dollar fell against a basket of currencies, bolstered by a return to risk-seeking behaviour after remarks by the U.S. Federal Reserve convinced investors that borrowing costs would stay near zero and the debt-buyback programme would continue apace.

The weaker U.S. unit also made dollar-denominated gold cheaper for holders of foreign currencies.

The precious metal, viewed as a potential hedge against inflation, also got a boost from steady oil prices as supply concerns held crude above $70 a barrel.

Analysts said that gold was rallying on the weaker dollar and end-of-quarter deals, despite weak fundamental demand.

“From a fundamental perspective at least, $945 is a very good position for gold to be entering the second half of the year,” said Nick Moore, head of commodity strategy at RBS Global Banking and Markets.

RECOVERY PLAYS

Higher base metal prices, which have soared since the start of the year, could encourage investors to switch out of their holdings in gold to take advantage of higher demand for raw materials ahead of any economic recovery, analysts said.

“I’m concerned there will be more appetite for other things, and gold could get neglected if people want equities, energy and industrial metals,” said Robin Bhar, an analyst at Calyon.

“Next week is a new quarter, which could be associated with fresh investment flows into plays on the recovery,” he added.

Copper prices are up about 60 percent on the year, while aluminium used in transport and packaging is on track for its biggest monthly gain since May 1988.

Inflows into gold-backed exchange-traded funds waned, reflecting weak fundamental demand for gold from retail investors and the jewellery market.

Holdings at the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , fell 0.5 percent to 1,125.74 tonnes as of June 25, down 5.5 tonnes from the previous business day.

U.S. gold futures for August delivery strengthened to $946.8 an ounce, rising 0.8 percent on the day.

In other precious metals, spot silver firmed to $14.25, against $14.01 quoted late in New York on Wednesday, while platinum climbed to $1,199.00, against $1,186.00 and palladium strengthened to $243.50 from $242.00.

London, June 26 (Reuters)

Oil prices and stocks around the world tumbled on Monday after a jump in troubled loans at Bank of America and renewed signs of economic weakness cooled investors’ optimism the worst of a global slowdown was over.

The U.S dollar rallied broadly to trade at one-month highs as the slide in worldwide equity markets boosted safe-haven demand for the greenback, U.S. and European government debt and gold.

Bank of America stock shed 17 percent after reporting its purchase of Merrill Lynch & Co helped to more than double first-quarter profit, but credit quality deteriorated sharply, hurt by a flagging economy and growing unemployment.

Also weighing on sentiment was a key gauge of future economic activity, which fell for the third month in a row in March, showing the U.S. recession may persist through summer.

In another sign of weakness, Germany fell deeper into recession in the first quarter, the Bundesbank said, fueling expectations of a record contraction in gross domestic product.

Most major European and U.S. stock indexes fell more than 3.0 percent as analysts questioned the prospect for corporate earnings.

Shares of Citigroup Inc fell 16 percent after Goldman Sachs said credit losses at the bank continued to grow at a rapid rate, putting a damper on earnings expectations.

“People are starting to peel the results back and say wait a second,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “Can (the results) continue in the next quarter?”

At 1 p.m., the Dow Jones industrial average was off 219.04 points, or 2.69 percent, at 7,912.29. The Standard & Poor’s 500 Index was down 28.93 points, or 3.33 percent, at 840.67. The Nasdaq Composite Index was down 54.10 points, or 3.23 percent, at 1,618.97.

Banking shares took the most points off an index of leading European companies, sparked by Bank of America results.

The FTSEurofirst 300 index of top European shares closed 3.5 percent lower at 786.12 points, the biggest daily percentage drop since March 30.

Deutsche Bank lost 8.6 percent, Barclays fell 7.9 percent and BNP Paribas 6.6 percent.

The DJ STOXX Banks Index fell 5.5 percent.

Oil slid more than 8.0 percent to about $46 a barrel, depressed by a rising dollar and growing caution about the pace of any economic recovery and its impact on oil demand.

U.S. crude for May delivery was down $3.95 at $46.38 a barrel. Brent crude for June fell $3.09 to $50.26.

President Barack Obama said on Sunday the U.S. economy remained under strain and his top economic adviser tempered hopes for a speedy recovery that have driven Wall Street to six straight weeks of gains.

Managing Director Dominique Strauss-Kahn of the International Monetary Fund was quoted Sunday as saying the IMF would cut its global economic forecasts this week and that he did not expect a recovery to start unitl the first half of next year.

“Near term, we don’t see any supportive factors for the oil market,” said Harry Tchilinguirian, oil analyst at BNP Paribas in London. “We have not yet turned the corner on the economy, oil demand is very weak and inventories are high.”

The U.S. dollar rallied, boosted by volatility in global equity markets and expectations the U.S. economy will rebound from recession sooner than other regions.

“There’s no doubt among investors that the U.S. will be the first to get out of this recession,” said Matt Esteve, a currency trader at Tempus Consulting in Washington. “As stocks around the globe move lower, we are seeing a re-emergence of risk aversion and the dollar gets a boost.”

The dollar rose against a basket of major currencies, with the U.S. Dollar Index up 0.82 percent at 86.604. Against the yen, the dollar fell 1.20 percent at 97.94.

The euro fell 0.83 percent at $1.293.

Gold rose about 2.0 percent, with spot gold prices rose $17.25 to $885.15 an ounce.

U.S. and euro zone government bonds rallied as a steep fall in equities helped underpin appetite for less risky fixed-income assets.

Fears about the financial sector were also stoked by a blog which said it had obtained the results of “stress tests” on the health of the top 19 U.S. banks. A spokesman said the U.S. Treasury Department has not received results.

“It’s a pure risk aversion type day today … it’s all about the bond market reacting to very weak equities,” said John Davies, fixed-income strategist at West LB.

The benchmark 10-year U.S. Treasury note rose 26/32 in price to yield 2.86 percent. The 2-year U.S. Treasury note rose 3/32 to yield 0.93 percent.

Asian stocks edged higher. The MSCI index of Asia-Pacific shares outside Japan was up 0.7 percent and Japan’s Nikkei average drifted up 0.2 percent.

April 20 (Reuters)

Reassurances over the health of the U.S. banking industry have sparked something of a recovery in investors’ appetite for risk and Wall Street looked set to join Asia and Europe with strong gains at the open.

Executives from Citigroup , Bank of America and JPMorgan Chase said last week their banks had been profitable for the first two months of the year.

Federal Reserve Chairman Ben Bernanke also said on Sunday that he sees the U.S. economic decline moderating and recovery beginning in 2010, though he said risks remain that politicians will lack the will to do everything needed to fix the fractured financial system.

Global stocks as measured by MSCI rose more than 1.3 percent, bringing gains to more than 11.5 percent since hitting a low a week ago.

“The eternal battle between the bulls and the bears will intensify this week,” said Chris Hossain, senior sales manager at ODL Securities.

“Whilst it is hard to say if we have seen the worst, we certainly haven’t seen a week like last week in a long time.”

European shares also rose for a fifth straight session, led higher by financial stocks.

The pan-European FTSEurofirst 300 and 14 percent this year after plunging 45 percent in 2008.

Earlier, Japan’s Nikkei average gained 1.8 percent to post its highest close in a month, with banks such as Mitsubishi UFJ Financial Group  jumping amid the easing fears about the health of U.S. lenders.

The benchmark rose 134.87 points to 7,704.15, its highest finish since Feb. 16. The broader Topix  climbed 2.4 percent to 741.69.

BONDS FOR SALE

The equity charge undermined demand for government bonds with June Bond futures down 73 ticks, two-year Schatz yields rising 5 basis points to 1.381 percent, and 10-year Bond yielding 3.127 percent, up 8 basis points.

“At least risk aversion is decreasing and there was no disappointment on the back of the G20,” said Patrick Jacq, interest rate strategist at BNP Paribas in Paris.

“Clearly, as financial stocks still remain the driving force, this is helping stock markets to rebound further.”

Over the weekend, finance ministers and central bankers from Group of 20 countries pledged to use their full fiscal and monetary firepower to combat the economic crisis, but the decisions taken focused more on funds for the IMF and regulating hedge funds.

The dollar fell broadly, reversing earlier gains made in the Asian session, as stock markets rallied.

The currency market was also looking ahead to policy meetings by the Federal Reserve and the Bank of Japan later in the week.

The dollar fell 0.65 percent against a basket of currencies to 86.687, while the euro rose 0.8 percent from U.S. trade on Friday to $1.3022 .

The U.S. currency, however, gained 0.49 percent to 98.43 yen .

March 16 (Reuters)

Government debt prices fell as U.S Treasuries retreated on the prospect of $63 billion in new supply this week and shorter-dated euro zone bonds slipped ahead of 8 billion euros worth of two-year paper from Germany on Wednesday.

Crude oil rose above $47 a barrel at one point after renewed buying on speculation the Organization of Petroleum Exporting Countries may cut production again at its meeting on Sunday in Vienna.

Equity markets in Europe and the United States were choppy as higher energy prices pulled up oil shares while U.S. bank shares rose on optimism that Washington will provide more clarity on government plans to shore up the U.S. banking system.

U.S. Federal Reserve Chairman Ben Bernanke was attending a meeting on the economy with President Barack Obama, the White House said.

But in Europe, financials took the most points off the FTSEurofirst 300 index of top European shares as investors continued to flee the financial sector following news of further government stake-building, fanning worries about the stability of Britain’s banks.

Growing fears about the ailing U.S. automakers and banking drove interbank U.S. dollar borrowing costs up.

In Asia, Japan’s Nikkei average closed at a 26-year low, finishing down 1.2 percent, and other Asian markets slipped on worries about the fate of General Motors and U.S. banks.

“The dollar seems to be the only safe haven left right now, with both the yen and Swiss franc under pressure,” said Robert Blake, senior currency strategist at State Street in Boston.

“We’re certainly in risk aversion mode and the trade right now is to buy dollars, which to a large extent reflects huge repatriation flows to the United States.”

Currencies have tracked equity markets’ performance over the last few weeks, with the dollar tending to benefit when stocks fall as investors seek shelter amid fears of a collapse of banking systems worldwide.

The dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index up 0.53 percent.

The euro fell 0.12 percent at $1.2625, while against the yen, the dollar rose 0.50 percent at 98.86.

With the outlook so dim, Barclays cut its year-end target for the S&P 500 to 760, saying the probability of the benchmark U.S. stock index hitting an initial 875 was much lower now.

After 1 p.m., the Dow Jones industrial average was down 62.76 points, or 0.95 percent, at 6,564.18. The Standard & Poor’s 500 Index was down 4.35 points, or 0.64 percent, at 679.03. The Nasdaq Composite Index was down 18.56 points, or 1.43 percent, at 1,275.29.

The biggest drag on the Dow was Merck & Co Inc after its proposed $41 billion takeover of Schering-Plough raised concerns about the depth and breadth of the recession as it hurts such defensive sectors as drugmakers, analysts said.

“This deal was done in a declining environment for both companies,” said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

The FTSEurofirst 300 index of top European shares closed down 0.7 percent at 657.30 points.

The benchmark 10-year U.S. Treasury note fell 6/32 in price to yield 2.90 percent. The 2-year U.S. Treasury note fell 3/32 in price to yield 0.99 percent.

U.S. light sweet crude oil rose 94 cents to $46.46 a barrel.

OPEC Secretary-General Abdullah al-Badri said the 12-member producer group would consider reducing output again at its meeting on Sunday as it tries to counter downward pressure on oil prices from falling demand.

“All options are on the table,” he told reporters in Qatar when asked if OPEC, which pumps more than one-third of the world’s oil, would announce another reduction in supply at its meeting in Vienna.

Spot gold prices fell $18.90 to $917.65 an ounce.

March 9 (Reuters)