(Repeats to add byline)
* Dollar slides, on track to biggest plunge in 13 years
* Oil surges more than 8 pct on weak dollar, inventories
* Global stocks rally in anticipation of Fed rate cut
* Commodity prices surge as dollar falls
By Herbert Lash
NEW YORK, Oct 29 (Reuters) - The U.S. dollar plunged on
Wednesday as it headed toward its biggest one-day decline
against major currencies in 13 years, driving up the price of
oil more than 9 percent and sending other commodities sharply
higher.
A rally in global stock markets after Wall Street's huge
gains on Tuesday helped ease risk aversion and led investors to
pare their dollar holdings. Expectations that the U.S. Federal
Reserve will cut interest rates by at least a half percentage
point later in the day also helped drive up stocks and pressure
the dollar.
Leading European stock indexes closed up about 7 percent,
led by banks and commodity stocks, following a 7.7 percent rise
in Japanese stocks.
The yen rallied, retracing steep losses a day earlier, as
global recession fears persisted despite firmer sentiment in
equity markets around the world.
Oil surged to above $68 a barrel as a weaker dollar and
weekly U.S. government fuel inventory data showed crude stocks
rose less than expected last week and gasoline supplies fell
unexpectedly.
Commodity prices soared on the weaker dollar. Copper surged
nearly 8 percent at one point, lifting other industrial metals,
while gold jumped nearly 4 percent in a rally that boosted
silver nearly 10 percent.
U.S. equity markets struggled to rally after the Dow surged
almost 11 percent on Tuesday in its second-biggest point gain
on record. But reassuring news about merger talks between
troubled automakers General Motors <GM.N> and Chrysler, and
optimism the Fed will slash interest rates lifted U.S. stocks
at midday.
The Fed is due to announce its rate decision at around 2:15
p.m. (1815 GMT), at the close of its two-day policy meeting.
On the automaker front, according to sources familiar with
the matter, major issues have been resolved in GM talks with
private equity firm Cerberus Capital, owner of Chrysler. GM
shares jumped nearly 9 percent to $6.81 on the New York Stock
Exchange.
Before 1 p.m., the Dow Jones industrial average <> was
up 69.69 points, or 0.77 percent, at 9,134.81. The Standard &
Poor's 500 Index <.SPX> was up 6.48 points, or 0.69 percent, at
946.99. The Nasdaq Composite Index <> was up 19.83 points,
or 1.20 percent, at 1,669.30.
Basic resources, insurance and banking stocks led the
European stock rally. The pan-European FTSEurofirst 300
<> jumped 7.51 percent to 897.06 points, and Britain's
FTSE 100 <> rose 8.1 percent to 4,242.54.
Basic resource providers were strong gainers as the sector
added 12.3 percent the pan-European index, with Anglo American
<AAL.L> climbing 20.9 percent, while Arcelormittal <MTP.PA> and
Salzgitter <SZGG.DE> both added about 12 percent.
Insurers were also in demand, led by Allianz SE <ALVG.DE>,
which added 26 percent, and Old Mutual <OML.L>, which raced
ahead 30 percent to top the sector.
U.S. Treasury debt prices edged up as bond investors bet
the Federal Reserve will deliver a hefty interest rate cut.
The Fed is widely expected to cut U.S. rates by at least
half a percentage point to 1 percent, which would be the lowest
level since June 2004.
A half percentage point reduction, however, might not
bolster U.S. government debt prices much, some said.
"I think that Treasuries are going to find it tough (to
rally) since if the Fed drops by 50 basis points like everyone
is expecting, that doesn't leave them much more room to
maneuver," said Kevin Giddis, managing director of fixed
income/head fixed income trader with Morgan Keegan in Memphis,
Tennessee.
Besides the Fed, traders and analysts anticipate the
European Central Bank and the Bank of Japan will trim rates
after China and Norway did so on Wednesday to combat the crisis
in financial markets and a faltering global economy.
"We're seeing a bit of a reversal of the deleveraging
process because of the rise in global equities and thus we're
seeing the dollar trading lower," said Ken Landon, a currency
strategist, at JP Morgan Chase in New York.
U.S. Treasury debt prices were mixed. The benchmark 10-year
U.S. Treasury note <US10YT=RR> rose 4/32 in price to yield 3.83
percent, and the 2-year U.S. Treasury note <US2YT=RR> fell 5/32
in price to yield 1.56 percent.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> off 1.97 percent at 84.724.
The euro <EUR=> rose 1.55 percent at $1.291, while against
the yen, the dollar <JPY=> fell 1.04 percent at 97.71.
U.S. light sweet crude oil <CLc1> rose $5.73 to $68.46 a
barrel.
Spot gold prices <XAU=> rose $8.80 to $753.10 an ounce.
Japan's Nikkei stock index <> ended up 7.7 percent
after plumbing its lowest level since 1982 on Tuesday. The
Nikkei has fallen as much as 40 percent in the past month.
Asia-Pacific stocks outside Japan climbed 2.3 percent after
touching a 4-year low on Tuesday, according to an MSCI index
<.MIAPJ0000PUS>.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, John
Parry and Robert Gibbons in New York, Jan Harvey in London and
Tyler Sitte in Frankfurt; Writing by Herbert Lash; Editing by
Leslie Adler)
