GLOBAL MARKETS-Wall Street rallies on banks, oil's price drop

* Wall Street posts biggest one-day advance since April 1

* U.S. banking shares post biggest one-day rise since 1992

* Oil falls sharply on rise in U.S. crude inventories

* Dollar rises as Bernanke discusses currency intervention (Adds banking index data; comment on oil-bank trade strategy)

By Herbert Lash

NEW YORK, July 16 (Reuters) - U.S. stocks jumped on Wednesday after strong results at Wells Fargo fueled a powerful rally in the battered banking sector and an unexpected leap in U.S. crude supplies led oil prices to fall sharply.

Equity markets in Europe also ended higher as a weaker euro underpinned automotive stocks and Wells Fargo (WFC.N: Quote, Profile, Research) lifted banks that also have been slammed by the global credit crunch.

Spot gold prices tumbled about 2 percent as crude oil slid for a second day, and the dollar extended gains after Federal Reserve Chairman Ben Bernanke said that under certain conditions currency intervention may be warranted.

Minutes from the Fed's June meeting showed policy-makers believed the next interest rate move could be an increase, which would help strengthen the dollar.