* World stocks <.MIWD00000PUS> climb 1.5 pct
* Fed announces to buy $300 billion of long-dated Treasuries
* Dollar under pressure, European credit spreads tighten
* Commodities up on hope of pick up in industrial activity
By Atul Prakash
LONDON, March 19 (Reuters) - World shares rose on Thursday
as the U.S. Federal Reserve's surprise announcement it would
start large-scale buying of government debt sparked optimism
that the battered U.S. economy could soon begin to recover.
The announcement put the dollar under severe pressure,
sharply lowered U.S. Treasury yields and tightened European
credit spreads, while crude oil and metal prices gained on hopes
that there would be a pick up in global industrial activity.
The Fed said it would buy $300 billion of long-dated
Treasuries over the next six months, its first large-scale
purchases of government debt since the early 1960s, while also
boosting buying of mortgage-backed securities and agency debt in
its bid to rescue the economy. []
The Fed had floated the idea of buying Treasuries some time
ago but then seemed to go cold on the idea. The sudden change of
direction took most investors completely by surprise. The move
also effectively amounts to the Fed printing money -- and is
hence bad news for the dollar.
World stocks, as measured by MSCI's all country index
<.MIWD00000PUS> climbed 1.5 percent to 200.30, while European
shares <> rose 0.4 percent. U.S. stocks rallied overnight
as investors bet the Fed's move would kick-start lending.
"With markets coming off lows, there is a growing belief
that we are seeing snippets of positive news coming out," said
Chris Hossain, senior sales manager at ODL Securities.
"Whilst it is too early to say that the green shoots of
recovery are here, the pendulum appears to be swinging back to
half way. Only time will tell if we swing back, or the momentum
is continued throughout 2009."
But the gains in global stocks dented the dollar's appeal as
a relative safe-haven, knocking it down from a three-year peak
hit against a basket of currencies earlier in the month.
The dollar index <.DXY>, a gauge of its performance against
a basket of major currencies, was flat at 84.206 after a 3
percent slide on Wednesday that was its biggest one-day drop
since 1985. Traders said the dollar may resume its fall.
DOLLAR OVERSUPPLY CONCERNS
The Fed move stirred worries that the sharp expansion of the
Fed's balance sheet, which has already doubled in size in the
past six months, and could lead to an oversupply of the world's
main reserve currency.
The U.S. was not alone in buying of government debt. The
Bank of England is buying 75 billion pounds of gilts and the
Bank of Japan on Wednesday announced it would increase its
purchases of Japanese government debt. []
[]
The Swiss National Bank surprised markets last week with
intervention to weaken the Swiss franc as well as an interest
rate cut to fight a deep recession.
In addition, the European Central Bank may also eventually
turn to non-standard policy measures after cutting interest
rates to a record low 1.5 percent in March. []
"We'll have to see how this pans out, but ultimately the Fed
are printing paper, the UK are printing paper, the Swiss are
printing paper, the Japanese are printing paper -- they are all
at it and I don't want to buy those currencies," said David
Bloom, global head of FX research at HSBC markets in London.
"I don't believe in the argument that its going to create
economic growth and you will get portfolio flows -- forget it,
they are sorting out a crisis," he added.
European credit spreads tightened as concerns about risks
eased after the Fed announcement. The investment-grade Markit
iTraxx Europe index <ITEEU5Y=GF> was at 183 basis points,
according to data from Markit, 8 basis points tighter versus
late on Wednesday.
The Markit iTraxx Crossover index <ITEXO5Y=GF>, made up of
50 mostly "junk"-rated credits, was at 1,108 basis points, 25
basis points tighter.
U.S. Treasury yields were steady, after plunging by the most
in 26 years the previous day.
Commodity markets were cheered on a glimmer of hope that the
Federal Reserve's move would revive the global economy, boost
industrial activity and increase demand for oils and metals.
Oil prices <CLc1> rose 1.7 percent to near $49 a barrel,
copper <MCU3> climbed to a four-month high and aluminium <MAL3>
rose more than 2 percent.
(Additional reporting by Veronica Brown)
