* MSCI world equity index up 2.85 pct at 232.80
* MSCI emerging equities index up more than 9 pct
* Euro, oil rally, bond prices fall
By Carolyn Cohn
LONDON, Oct 30 (Reuters) - World stocks and the euro rallied
on Thursday, driven by bargain-hunting and sweeping gains in
emerging markets after the U.S. Federal Reserve cut interest
rates and opened swap lines to four developing economies.
Investors saw a return to risk appetite and the carry trade
and renewed weakness in the dollar after the Fed chopped half a
point off the fed funds rate to 1.0 percent and left the door
open to further cuts.
The Fed also opened up dollar liquidity aid beyond
traditional markets, with four new $30 billion currency swap
lines with Brazil, Mexico, South Korea and Singapore.
"The Fed's statement has paved the way for further rate cuts
...Its policy outlook is softer, and is pushing the dollar
lower," said David Tinsley, economist at nabCapital.
"The Fed is doing its bit to shore up emerging economies, so
that's improving risk appetite towards those currencies."
The MSCI world equity index <.MIWD00000PUS> rallied by
nearly 3 percent, driven by gains of over 9 percent in the
benchmark emerging equities index <.MSCIEF>.
Emerging equities have bounced by 24 percent from four-year
lows set on Tuesday.
They got a further boost from the International Monetary
Fund's approval of a short-term financing facility for emerging
market economies that have a good economic track record but are
having difficulties accessing credit. []
The euro rose 1.5 percent to $1.3158 <EUR=> within a broad
rally towards higher-yielding currencies, but the U.S. currency
gained 1 percent to 98.46 against the low-yielding yen <JPY=>.
The FTSEurofirst 300 <> index of leading European
shares rose 0.67 percent, extending its rally into a third day,
helped by rising commodity prices.
China, Hong Kong, Norway and Taiwan also cut rates in the
past 24 hours, and pressure mounted on the Bank of Japan to
reduce rates after it meets on Friday. Asian equity markets
surged, with Japan's Nikkei average <> up 10 percent.
The European Central Bank and Bank of England are also
expected to cut rates next week.
But analysts cautioned that investors had taken the
opportunity to go bargain-hunting, and markets remained
volatile.
"This is a fantastic rally, but it is only a rally," said
Justin Urquhart Stewart, director at Seven Investment
Management.
"The rate cuts are encouraging. But we're dealing with a
slump. It's not a matter of whether it's bad, it's a matter of
how bad."
Oil rose by $1.58 a barrel to $69.10 <CLc1>, while euro zone
government bond futures <FGBLc1> fell 55 ticks to 116.41, in
line with weaker U.S. Treasuries after the Fed cut.
Emerging sovereign debt spreads, a measure of appetite for
higher-risk assets, tightened by a hefty 48 basis points to 684
bps over U.S. Treasuries <11EMJ>.
(Additional reporting by Brian Gorman and Naomi Tajitsu;
editing by Patrick Graham)
