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Banking stocks lead markets surge

Updated:2009-03-11 09:14:50

The news pushed shares in Citigroup 37% higher, and banking stocks led a surge on the US markets.

The Dow Jones index closed up 379.44 points, or 5.8%, to 6,926.49. The Standard & Poor's (S&P) 500 rose 6.4%.

The rises tracked gains seen in Europe. Markets in London, Frankfurt and Paris were all up about 5% at the close.

The rally followed three consecutive days of declines on global markets.

Also in New York, the technology-based Nasdaq index soared by 7%, closing the day at 1,358.28 points.

In a memo to workers, Citigroup Chief Executive Vikram Pandit said the bank was having its best quarter-to-date performance since the third quarter of 2007.

The memo also said Citigroup was confident about its capital strength.

Resurgent banks

Other financial stocks also jumped, with Bank of America up 28% and JP Morgan Chase up 22%.

Investors were also buoyed by comments from the head of the US House Financial Services Committee that the Securities and Exchange Commission (SEC) could soon re-impose the uptick rule.

The rule, which bans short trades unless the last movement in the stock price was upwards, was repealed by the SEC in 2007 because it found that changes in trading strategies made it ineffective.

Democrat Representative Barney Frank said: "I've spoken to Chair [Mary] Schapiro of the SEC. I am hopeful the uptick rule will be restored within a month."

One boss of a leading UK-based hedge fund told the BBC that the uptick rule should never have been abolished, describing it as a sensible piece of market regulation in the market.

European gains

In Europe, Barclays climbed 10% while Deutsche Bank gained 16%.

In recent months financial institutions have been among the main losers, the value of their shares hammered by large losses and writedowns.

Shares in Citigroup fell below $1 a share last week.

Ben Halliburton, chief investment officer of Tradition Capital Management, warned that the rally was likely to be short-lived.

"I would be surprised to see us trade back over 800 in the near term," he said, referring to the S&P 500 index, which closed on Tuesday on 719.60.

"The news coming out on the economic front will continue to be rather gloomy."


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