Stocks Rise Hopes For Obama Plan, Oil Jumps

German politicians also debated tax cuts to revive Europe`s largest economy.

Stocks rose across the globe on Tuesday, extending an advance which began last week as investors bet on a world-wide economic recovery, while political events drove oil briefly above $50 a barrel.

Technology shares led among gainers on Wall Street and the U.S. dollar extended a three-day rally versus most major currencies, particularly the euro.

The stronger dollar weighed on gold, which fell to a two-week low, while concerns about a massive pending supply of government debt needed to pay for an economic rescue pushed bond yields to their highest level in three weeks.

Investors looked past weak U.S. economic data and focused on U.S. President-elect Barack Obama's stimulus plan, which has been helping fuel a tentative recovery in the world's stock markets.

The stimulus plan may also include $310 billion in tax cuts as part of a $775 billion package.

German politicians also debated tax cuts to revive Europe's largest economy.

In midday trading in New York, the Dow Jones industrial average was 0.3 percent higher at 8,982.12 and the Nasdaq Composite Index traded 1 percent higher at 1,643.93.

The pan-European FTSEurofirst 300 index of top European shares closed up 1.6 percent. It has now gained around 18 percent since hitting a low in late November.

"The main things are the Obama plans as well as the German fiscal stimulus package," said Bernard McAlinden, market strategist at NCB Stockbrokers. "Markets, rather than focusing on the dire economic and earnings data, are looking forward to the hope that these plans will work."

In Japan, the Nikkei 225 closed up 0.4 percent and the MSCI index of Asia-Pacific stocks outside Japan edged up for a seventh straight day, gaining 0.48 percent.

Higher oil prices helped boost shares of energy companies, but sharp gains in energy prices may cause some headline inflation problems later for central banks intent on cutting interest rates, analysts said.

Crude hit a one-month high above $50 a barrel, driven higher by heightened concern about supply disruptions stemming from Israel's incursion into Gaza and a dispute between Russia and Ukraine over natural gas.

"Oil prices continue to be supported by political issues, whether they be gas or Gaza-related," Rob Laughlin, broker at MF Global, said.

U.S. crude prices rose $1.25 to $50.06 a barrel after gaining 5 percent overnight. Prices were last 0.2 percent higher at $48.92 a barrel.

DOLLAR JUMPS

The dollar jumped nearly 1.5 percent against a basket of currencies, particularly gaining against the euro, which fell sharply on speculation the European Central Bank will cut interest rates further as price pressures ease and euro-zone economies weaken.

The dollar rose even as reports showed a steep drop in factory orders and pending home sales in November.

"Economic data in the euro zone is just as terrible as it is in the U.S. but U.S. officials have been very pro-active, actually the most pro-active in combating the recession," said Matt Esteve, a foreign exchange trader, Tempus Consulting in Washington.

"With Barack Obama basically saying he's willing or ready to do what is needed to help the economy out of recession, it's definitely a dollar-positive."

The euro fell around 1.6 percent to $1.3401 according to Reuters data. Against the yen, the dollar rose 1 percent to 94.08 yen.

The dollar's gains pushed gold futures to a two-week low. Gold for February delivery was down $2.80 to $854.90, off earlier lows near $846.90.

U.S. Treasury debt prices fell, while benchmark yields rose to the highest in three weeks.

Benchmark 10-year Treasury notes were trading 28/32 lower in price for a yield of 2.57 percent compared with 2.48 percent late on Monday. The benchmark yield was trading at its highest since mid-December.

On euro-zone government bond markets, the interest rate-sensitive 2-year Schatz yield was flat at 1.694 percent, while 10-year Bund yields were up 4 basis points at 3.058 percent.