US stocks rallied 10.9 per cent as investors snapped up bargains following a torrid month on Wall Street. The blue chip index rocketed 889.35 points, its second largest point advance ever.

Investors shrugged off disappointing economic data. The Conference Board’s Consumer Confidence index tumbled from a revised 61.4 in September to 38 in October. Economists had flagged a reading of 52.

A separate report showed ongoing weakness in home prices. August home prices in ten major US markets were down 17.7 per cent compared to a year ago.

Expectations of a rate cut following tomorrow’s Federal Reserve meeting helped shield investor sentiment from the economic news.

The CBOE Volatility index, often called the fear index, dropped 16.4 per cent to 66.96. Last week, the VIX hit an all time high of around 89.

Looking to the major equity indexes, the Dow jumped 889.35, or 10.88 per cent to 9,065.12, while the broader S&P 500 rose 91.59, or 10.79 per cent to 940.51. The NASDAQ climbed 143.57, or 9.53 per cent to 1,649.47.

The gains were broad based, with all thirty Dow components closing higher.

Among financials, Bank of America added 12.1 per cent, JPMorgan gained 10.6 per cent and Citigroup rallied 14.3 per cent. Morgan Stanley and Wells Fargo were up 10.7 per cent and 11.8 per cent respectively. Goldman Sachs picked up a relatively modest 0.7 per cent.

Yesterday, the Treasury department said nine of the country’s largest banks were set to receive US$125 billion in Federal funds. Meanwhile, around ten regional banks said they would get over US$18 billion.

Among regional banks, the beneficiaries included KeyCorp, Capital One Financial Corp and SunTrust.

KeyCorp added 19.6 per cent, Capital One jumped 16 per cent and SunTrust rallied 13 per cent.

Credit markets continued to show signs of improvement. The overnight Libor, the rate banks charge each other for overnight loans, fell from 1.26 per cent to 1.24 per cent. Meanwhile, the three-month Libor slid to 3.47 per cent from 3.51 per cent.

Oil majors rallied despite continued weakness in crude prices. NYMEX light crude for December delivery fell US60c to US$62.62 a barrel.

However, Exxon Mobil and Chevron jumped 13.3 per cent and 13.5 per cent respectively. ConocoPhillips closed nearly 10 per cent higher. Oil field engineering and services firms Schlumberger and Halliburton were up 10.9 per cent and 9.4 per cent.

Gold lost ground after posting solid gains in recent sessions. COMEX gold for December delivery fell US$2.70 to US$740.20 an ounce. But gold producers, along with other miners and basic materials producers rose.

Freeport-McMoRan gained 12.8 per cent, while Newmont Mining jumped 22.9 per cent. ADRs for BHP Billiton, Rio Tinto and Vale raced 16.9 per cent, 13.7 per cent and 16.7 per cent higher. Monsanto Group gained 17 per cent and Potash Corp added 9.1 per cent in US trade.

Elsewhere, Boeing jumped 15.5 per cent. News that it reached a tentative deal with its largest union helped the company outperform the market. Lockheed Martin and Northrop Grumman rose 10.5 per cent and 9.7 per cent.

Among technology stocks, Apple added 8.5 per cent and Microsoft picked up 9.1 per cent. Yahoo! and Google rose 6.7 per cent and 11.9 per cent respectively.

UK Markets

British stocks closed almost 2 per cent higher on Tuesday after BP reported better than expected results for the third quarter. The banking sector made modest gains, with bargain hunters were out in force.

The FTSE 100 added 73.79 or 1.92 per cent at 3,926.38.

BP jumped 5.4 per cent after beating forecasts and reporting a 148 per cent rise in profits in the September quarter to US$10 billion.

Also in the sector, Royal Dutch Shell advanced 4.7 per cent, Cairn Energy was up 2.1 per cent and BG Group climbed 7 per cent. On Tuesday, BG Group agreed to pay $5.2 billion for the remainder of Australia’s Queensland Gas it does not already own.

Vodafone jumped 5.8 per cent after JPMorgan said valuations were well supportive of its overweight stance on the mobile phone giant.

In the banking sector, Standard Chartered increased 2.9 per cent after the bank said credit losses from US financial institutions would not be material.

HBSC Holdings was up 2.3 per cent and HBOS advanced 12.5 per cent.

Insurer Aviva gained 5.6 per cent after reporting a better than expected 12 per cent rise in its nine-month sales.

On the downside for the sector, Prudential, Legal & General and Standard Life lost between 6.8 per cent and 10.2 per cent.

Barclays slipped 6 per cent, Lloyds dropped 4.4 per cent and Royal Bank of Scotland edged 0.7 per cent lower.

Easing gold prices hurt the mining sector after early gains. Anglo American slipped 5.4 per cent, Lonmin fell 6.9 per cent and Kazakhmys slipped 3.1 per cent. BHP Billiton edged 0.3 per cent lower and Rio Tinto advanced 0.7 per cent.

European Markets

European stocks advanced on Tuesday as Volkswagen continued to surge. Defensive plays and oil producers were also in favour, while banks acted to limit gains.

France’s CAC 40 gained 47.57 or 1.55 per cent to 3,114.92, while Germany’s DAX leapt 488.81 or 11.28 per cent to 4,823.45.

Volkswagen extended yesterday's 147 per cent leap, adding a further 81.7 per cent. The rally followed Porsche’s disclosure that it now owns 74.1 per cent of the German car maker.

At one point in the session, VW staked a claim as the world's largest company by market cap, passing oil giant Exxon Mobil.

Meanwhile, Societe Generale slid 12.3 per cent on speculation the bank had short sold VW shares.

ING slipped 13.4 per cent and BNP Paribas lost 10.4 per cent. Commerzbank sank 13.3 per cent after WestLB cuts its recommendation on the German bank.

Trading was suspended for Intesa Sanpaolo and Unicredit after their shares lost their daily limit. Intesa was down 9.3 per cent, while Unicredit shed 12.1 per cent.

Credit Agricole was down 13.4 per cent and Deutsche Bank shed 13.3 per cent.

Sanofi-Aventis jumped 6.1 per cent as analysts anticipated solid third quarter results. Also in the sector, Novartis added 1.9 per cent after Goldman Sachs added the stock to its conviction buy list.

In the energy sector, France’s Total jumped 6.2 per cent, StatoilHydro rose 1.2 per cent and ENI added 0.6 per cent.

Japanese Markets

Japanese stocks managed to reverse much of Monday's losses, posting strong gains on Tuesday. Exporters jumped on a lower yen, while financials limited gains.

The Nikkei 225 gained 459.02 points, or 6.41 per cent to finish at 7,621.92.

Toyota jumped 7.8 per cent, while Honda rocketed 14 per cent higher. After the close, Honda announced a lower annual profit forecast.

Electronics makers Sony and Canon also had a positive day, advancing 9.6 per cent and 7.6 per cent respectively.

Shares in Seven & I Holdings were up more than 14 per cent after Credit Suisse lifted its rating from neutral to outperform.

All three of Japan’s top banks continued to decline on Tuesday. Mitsubishi UFJ was down 5.5 per cent, Mizuho Financial dropped 6.6 per cent and Sumitomi Mitsui shed 13 per cent.

Hong Kong Markets

Hong Kong shares snapped out of a five-day rout, recording their largest one-day gain in 11 years. Financials led the advance with HSBC the biggest boost to the index.

The Hang Seng Index advanced 1580.45, or 14.35 per cent to 12,596.30.

HSBC, which had lost 25 per cent of its value in the last two sessions, rose 20 per cent.

Other battered Chinese financials also had a good day. Bank of East Asia jumped 10.2 per cent after HSBC upgraded the stock from neutral to overweight.

China Life also benefited from an upgrade, jumping 13.9 per cent after JPMorgan lifted the stock to overweight from neutral.

Top lender ICBC soared 16.4 per cent, while China Construction Bank rocketed up 23.3 per cent.

However, Chinese property stocks didn’t participate in the day’s gains. China Overseas Land Investment dropped 8 per cent and Guangzhou R&F lost 12.6 per cent.

The Overnight MarketWatch report is provided by SHAW Stockbroking's egoli - simple but informative market news for the everyday investor.

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