US shares rise on home sales growth

US stocks rose as better-than-expected growth in domestic home sales bolstered optimism in the economy and energy producers rebounded after yesterday's tumble.

In late trading, the Dow Jones Industrial Average rose 1.66 per cent, the Standard & Poor's 500 Index advanced 1.91 per cent and the Nasdaq Composite gained 1.88 per cent.

Among the most active stocks on Wall Street were Halliburton, Schlumberger, Amgen and Wells Fargo.

In testimony at the US Financial Crisis Inquiry, Warren Buffett came to the defence of Moody's Investors Service, in which his company owns a stake, saying that it wasn't alone in misjudging the financial situation.

Buffett said reforms should target financial firms with too much leverage, and punish chief executives and boards that require unusual government aid.

"I am much more inclined to come down hard on the CEOs of the institutions that caused the United States government to necessarily bolster them than I am on someone who made a mistake that 300 million other Americans made," he said.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street's 'fear gauge', plunged 13.28 per cent to 30.82.

The Stoxx Europe 600 Index barely budged, rising less than 0.1 per cent, to 245.4.

The U.K.'s FTSE 100 fell 0.48 per cent and France's CAC 40 slipped 0.13 per cent. Germany's DAX gained 0.28 per cent.

Among the most active stocks in Europe were Danisco, GlaxoSmithKline , Anglo American and Prudential.

Prudential ended its effort to buy the Asian unit of American International Group. The planned purchase collapsed after Prudential's shareholders said the company was offering far too much.

US Treasuries fell as pending US home resales increased in April more than economists forecast, discouraging demand for the relative safety of government debt.

Ten-year note yields increased 7 basis points, or 0.07 percentage point, to 3.33 per cent at 1.12pm in New York, according to BGCantor Market Data.

The three-month London offered rate for dollars nudged up to 0.53750 per cent versus 0.53625 per cent on Tuesday, according to the latest daily fixings by the British Bankers' Association.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.04 per cent to 86.85.

The yen hit a two-week low against the US dollar after Japanese Prime Minister Yukio Hatoyama and his deputy resigned to try to boost the ruling party's faltering fortunes in an election next month.

Hatoyama's expected replacement, Finance Minister Naoto Kan surprised markets earlier this year by saying he wanted the yen to weaken more and that most businesses favoured a US dollar/yen rate around 95 yen. Since then he has mostly toed the Finance Ministry line that stable currencies are desirable and markets should set foreign exchange levels.

"Kan is a noted dove who has been an aggressive proponent of a lower yen in order to help stimulate Japanese exports," Boris Schlossberg, a director of currency research at GFT, in New York, told Reuters.

In mid afternoon trading in New York, the US dollar was up 1.3 per cent on the day at 92.17 yen, while the euro gained 1.3 per cent to 112.73 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, gained 0.25 per cent to 253.03.

US crude for July rose 93 cents a barrel to US$73.51 at 12.15pm EDT, after losing nearly 2 per cent on Tuesday.

Gains in Nymex oil for delivery in later months were steeper still, with the October contract up as much as US$1.35 a barrel.

Europe's ICE Brent rose US$1.43 a barrel to US$74.14 a barrel.

Spot gold was bid at US$1,219.10 an ounce at 1522 GMT, against US$1,224.30 late in New York on Tuesday.

US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange fell US$6.50 to US$1,218.50 an ounce.

"We have had some reports that (gold) mine supply is actually doing quite well, and jewellery demand is looking much weaker with the import data from India and Turkey out this week," Barclays Capital analyst Suki Cooper told Reuters.

"(So) fundamentals look quite weak, but ... investment demand still looks supportive. Consolidating around these levels looks likely at the moment, but as long as investment demand looks strong we would expect higher highs throughout the year."

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, rose 0.3 tons to a record 1,268.234 tons on Tuesday.