New York: US stocks bucked the global trend to end higher on Thursday, despite news of huge losses at major US banks, layoffs in the auto-industry and a slowdown in industrial production, all reinforcing fears of recession.
Japan's Nikkei fell 11 per cent in its worst one-day drop since the stock market crash of October 1987, oil fell more than six per cent to below $70 a barrel, and European shares lost five per cent.
European Union leaders vowed to shield their industries from the global crisis and pushed plans for a global summit to overhaul the world financial system.
But in New York, the allure of heavily battered shares drew buyers one day after Wall Street's worst day in more than 20 years.
The Dow ended up 4.68 per cent and the S&P 500 rose 4.25 per cent, buoyed by consumer companies seen as benefiting from the lower price of oil.
"I think this is bargain hunting and there are some bargains out there. Some of these stocks are at historic lows," said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas.
Wednesday's sharp fall had dragged the Dow down about 40 per cent from its record closing high of 14,164.53 hit on October 9, 2007.
Investors have pulled over $50 billion from stock funds so far in October, depressing prices in equities.
"In a couple of years we will look back at October of 2008 wishing we had bought more stocks," said Bob Doll, global chief investment officer of equities at BlackRock Inc, one of the world's largest asset managers.
In a reassuring move, rates that banks charge each other for loans mostly fell on Thursday in response to radical moves by central banks to provide liquidity, shore up banks and loosen credit lines to institutions needing cash.
Grim news on main street
In the real economy, however, the news from the United States was mostly grim.
Investment bank Merrill Lynch, which has agreed to be acquired by Bank of America, wrote down $5.7 billion of toxic assets and Citigroup reported a quarterly net loss of $2.8 billion.
US home builder sentiment sank to an all-time low in October, motorcycle maker Harley-Davidson Inc cut its earnings forecast, General Motors said it would lay off 1,500 hourly workers, and big US manufacturers braced for a slowdown.
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US industrial production marked its biggest drop in 34 years in September and factory activity in the US mid-Atlantic region fell to an 18-year low in October.
"We should anticipate further declines in employment and softness in most components of demand for goods and services," said Gary Stern, president of the Minneapolis Federal Reserve Bank.
Bernard McAlinden, strategist at NCB Stockbrokers in Dublin, said: "The whole cliche of Wall Street arriving on Main Street is so true now, with recession in the US, the UK, Europe and probably Japan, and significant slowing elsewhere."
Euro zone support
At a meeting in Brussels, European Union leaders vowed action to underpin growth and jobs threatened by the global financial crisis, but ruled out spending their way out of recession with a Europe-wide stimulus package.
French President Nicolas Sarkozy, who chaired a two-day EU summit, urged Europe to show the same unity in addressing the economic slowdown as it had in taking coordinated action to rescue banks and stabilise the financial system.
But traditional dividing lines between free-marketeers and statists resurfaced over whether countries should subsidise their auto sector to compete with US carmakers receiving $25 billion in discounted government loans.
Switzerland's two largest banks -- UBS and Credit Suisse -- became the latest to say they were receiving emergency funding as the country's government and other investors moved to shore them up.
The Bank of England said it would create two new facilities for banks to access funds from next week, which should remove the stigma attached to using its emergency lending system.
The European Central Bank on Wednesday said it will allow banks to swap a larger range of their assets for central bank funds and offer more funds across a range of currencies.
London interbank offered rates for dollars, euros and sterling fell across all maturities on Thursday, with the exception of overnight euro Libor.
Banks' unwillingness to lend to each other has been at the heart of the credit crunch so any sign of easing in rates there could indicate at least some recovery in confidence.
Governments around the world have pledged $3.2 trillion in emergency measures, including taking stakes in banks to help them stabilise.
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EU leaders said the upcoming summit to reform the global financial system should make early decisions on transparency, global standards of regulation, cross-border supervision and an early warning system.
Sarkozy said a meeting with US President George W. Bush on Saturday would help lay the groundwork for the global summit Sarkozy that said would launch a "refoundation of capitalism."
But White House spokeswoman Dana Perino said the meeting between Bush, Sarkozy and European Commission President Jose Manuel Barroso was not connected to the global summit.
A Reuters poll of economists said the world's richest nations are in, or close to, recession, with a sharp deterioration in the US outlook.
Germany on Thursday slashed its forecast for 2009 economic growth to 0.2 per cent from 1.2 per cent.
In Japan, a Reuters poll showed manufacturing business sentiment hit a six-year low this month.
Japan's prime minister, Taro Aso, said Washington may need to push yet more cash into its banks to restore investor confidence.
"The markets are selling off stocks because investors still think the steps by US authorities are not sufficient," Aso said.
The European Central Bank said it would provide up to 5 billion euros ($6.8 billion) to Hungary to pump up liquidity.
The International Monetary Fund was in talks to find ways to help Ukraine's economy.
($1 = .7320 Euro) ($1 = 1.133 Swiss Franc)
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