(Agencies)
Updated: 2008-03-19 07:24

SAFE-HAVEN BID SAPPED

Rising stocks sapped the safe-haven bid for government debt, and oil rose on expectations a Fed rate cut will further weaken the US dollar and spur investor demand for crude.

US benchmark 10-year Treasury notes traded a full point lower and euro-zone government bond prices tumbled as Wall Street rallied and inflation worries in Europe took the edge off speculation about a near-term rate cut by the European Central Bank.

Investors in Europe were less sure about a rate cut by the ECB after a media report that the bank was unlikely to cut rates anytime soon.

The FTSEurofirst 300 index closed up 3.5 percent at 1,241.99 points.

Banking stocks that have been hammered in recent days also led the rebound in Europe, with UBS up 14.4 percent, Credit Agricole up 9.3 percent and Deutsche Bank up 6.3  percent.

The strong rebound was echoed elsewhere in Europe: Germany's DAX index rose 3.35 percent, UK's FTSE 100 index was up 3.41 percent and France's CAC 40 gained 3.54 percent.

Most Asian stock markets closed higher, with MSCI's measure of Asian stocks outside Japan rising more than 1 percent. Hong Kong's main index climbed 1.4 percent and Japan's Nikkei 225 closed up 1.5 percent.

Oil prices rebounded sharply to over $109 a barrel after Fed rate cut, reversing heavy losses Monday that had been triggered by financial woes at investment banks, including Bear Stearns. That reflected weakness in the overall economy of the world's largest energy consumer.

US crude rose $3.74, or 3.54 percent, to settle at $109.42 a barrel after sliding more than 4 percent on Monday in the biggest one-day percentage drop in more than seven months. London Brent gained $3.81 to $105.56.

US gold futures finished slightly higher on the back of inflation fears due to a bounce of crude oil prices.

The active gold contract for April delivery in New York settled up $1.70 at $1,004.30 an ounce, a session high.

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