More signs of deep recession hit markets on Thursday, dragging stock prices down, but talk that a US rescue plan for banks may alter a key accounting rule later lifted both the dollar and Wall Street. The US dollar rose to near a one-month high against the yen as a rally in US stocks dimmed its appeal as a safe haven. A warning from the European Central Bank that the euro zone was undergoing an extended downturn helped weaken the euro. But US stocks rallied after financial services companies cut steep losses on news the US Senate might suspend mark-to-market accounting for tainted banking assets. The rule has forced banks to report billions of dollars in write-downs. “The market suspects there may be a suspension of mark-to-market accounting as part of the plan coming out of Washington to shore up the financial system,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. “It would be very impactful.” Sen. Christopher Dodd, chairman of the Senate Banking Committee, said late Wednesday that it might be possible to modify the accounting rule without abandoning its underlying standard. The Dow Jones industrial average rose 122.42 points, or 1.54 percent, at 8,079.08. The Standard & Poor's 500 Index gained 16.12 points, or 1.94 percent, at 848.35. The Nasdaq Composite Index added 29.35 points, or 1.94 percent, at 1,544.40. European shares fell, led by financials, as bleak economic data bode ill for corporate earnings prospects. The FTSEurofirst 300 index closed 0.1 percent lower at 810.49 points, well above its intra-day low after US stocks rallied. Stocks shrugged off monetary policy decisions by the Bank of England, which cut its base interest rate by 50 basis points to a record low 1.0 percent, and the European Central Bank, which left key rates unchanged as expected. European government bonds rallied, pushing the two-year yield to a two-week low, after the ECB Jean-Claude Trichet said zero interest rates were not something the bank considered “appropriate,” which also helped limit euro losses. Deepening concerns about a drop in US consumer demand helped push MSCI's index of Asia-Pacific stocks outside Japan down 0.4 percent, while Japan's Nikkei average slipped 1.1 percent.
