UPDATE 1-U.S. steel, coal shares surge on China building plan58 minutes ago by Thomson Reuters
* Steel, coal co shares rise sharply
* Analysts cite China infrastructure plan as driver
* European bank move also boosts positive sentiment (Updates with closing prices)
Sept 7 (Reuters) - China's approval of a $157 billion infrastructure building plan sent U.S. steel and coal company shares surging on Friday on the hopes it would stimulate the two sectors that have struggled to rebound from the recession.
The biggest gainer was coal miner Alpha Natural Resources , whose shares rose more than 16 percent on the New York Stock Exchange, while iron ore miner Cliffs Natural Resources added 14 percent and U.S. Steel gained 8 percent.
Michelle Applebaum, an analyst with Steel Market Intelligence in Chicago, said the jump in shares was clearly a reaction to the news out of China.
"Steel prices are determined globally, not domestically. What matters is what happens in China." She noted that 55 percent of global steel demand comes from China, compared with 8 percent from the United States.
Wall Street's positive sentiment was also buoyed by Thursday's European Central Bank (ECB) bond-buying program to resolve the euro zone debt crisis, she said.
"Any good global news matters, but especially in China."
Both the steel and coal sectors have been depressed in recent months as demand weakened, sending prices down. China's decision to greenlight 60 building, highway and railroad projects was clearly welcomed by investors who had deserted the sectors where share prices had plummeted.
William Burns, a coal industry analyst with Johnson Rice & Co in New Orleans, said the combination of the ECB move and China's roads and railways plan likely sent the stocks up.
"The Euro thing was an indication the economy will strengthen," he said. "And China's highways will require steel." Metallurgical coal, is a key ingredient in steelmaking.
"Chinese markets have been down recently and people have been very bearish," said Michael Dudas, of Sterne Agee.
He said the ECB action, and also hints that the U.S. Federal Reserve might make a move to stimulate the U.S. economy, were probably behind Wall Street's move back into coal and steel.
"There are stimulus hopes here and abroad, and China certainly does not hurt," said Dudas.
U.S. Steel shares closed the day up 8.74 percent at $20.89, AK Steel rose 7.6 percent to $5.78 and Nucor added 3.4 percent to $39.40. On the Nasdaq, Steel Dynamics closed 3 percent higher at $12.32.
Coal shares also rose. Alpha Natural Resources surged 16.75 percent to $6.90, and Peabody Energy gained 10.79 percent to $23.71. Arch Coal was 8.19 percent higher at $6.60 and Consol Energy jumped 6.9 percent to $31.21.
Cliffs Natural Resources whose iron ore is another ingredient in the steel-making process, gained 14.48 percent to close at $39.91. (Reporting By Steve James; Editing by Steve Orlofsky)