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Global Stocks Gain Despite Dire US Economic Forecasts

Stock prices closed mostly higher in Europe and Asia. Shares in New York posted strong gains for much of the day, despite gloomy news about U.S. consumer confidence. VOA's Kent Klein reports from Washington.

U.S. stock market indexes soared in a late rally Tuesday. The Dow Jones Industrial Average rallied nearly 11 percent (888 points) to close at 9,064. The S&P 500 rose 10.8 percent (92 points) to close at 940 and the NASDAQ gained 9.5 percent (144 points) to finish at 1,649.

Experts believe investors were looking for bargains, and ignoring pessimistic forecasts for the U.S. economy.

Economist Ken Goldstein at the Conference Board says the private research group's consumer confidence index in October is the worst it has been since the organization started keeping records more than 40 years ago.

"This is the average consumer's view of job declines that are going to intensify and perhaps stretch out for another 12 months," he said. "I mean, you have taken consumers who were worried and now are virtually in panic mode."

Goldstein says months of job losses have made American consumers afraid to spend.

"Cutting back, squeezing the household budget, putting anything that they can put off, putting off, doing without, and now really staring at, in their opinion, what they need to do is to cut back even more, down to the bare bones and perhaps more than that," he said.

Consumer spending drives about 70 percent of U.S. economic activity.

The Conference Board's Goldstein says the plunging consumer confidence index signals a terrible Christmas shopping season for American retailers, and not much improvement in 2009.

"And all of this is coming just four weeks before the start of the holiday season," he said. "So that clearly we are staring at one of the worst holiday seasons in a very long time. And for the consumer behavior and consumer spending to decline even more after the holidays, and stay down through the winter and through the spring, perhaps right through the next summer."

Meanwhile, the U.S. central bank, the Federal Reserve, has begun meeting to decide its next move on interest rates. The decision is to be announced Wednesday, and the Fed is widely expected to cut rates for the second time this month.

Also, the Bush administration says the U.S. government could help the three troubled American auto companies. White House Press Secretary Dana Perino says the government has been talking with General Motors, Ford and Chrysler.

"The automakers have been in contact with us," she said. "We have been talking to them at various levels and at different departments, including Energy, Treasury and Commerce, and we are trying to work with the tools that Congress has provided us."

Perino says portions of those companies that offer loans to buy automobiles may be eligible for help through the $700 billion financial rescue plan that Congress passed this month.

The White House spokeswoman also says the government could lend money to the car companies to help them build more energy-efficient vehicles.

"...which would allow us to provide around $25 billion in loans to help these automakers retool their plants so that they can help build more energy-efficient cars," she said.

A third option could involve the government taking a direct stake in at least one of the automakers.

General Motors, the nation's biggest auto company, has been in talks to merge with Chrysler, the third-largest.

Elsewhere, European stock prices closed mostly higher. London's Financial Times 100 index gained 1.75 percent. The CAC 40 in Paris was down about 0.1 percent. And the DAX in Frankfurt jumped more than seven percent. Shares of the German automaker Volkswagen jumped 93 percent after a similar surge Monday.

Iceland's prime minister says his country needs about $6 billion in loans to recover from the financial crisis, which forced the government in Reykjavik to take over its three biggest banks.

British Prime Minister Gordon Brown said more countries in financial trouble will be asking the International Monetary Fund for help, and he thinks the IMF should provide it.

In Asia, Tokyo's Nikkei index surged almost 6.5 percent, and Hong Kong's Hang Seng soared more than 14 percent.