* Global stocks gain as interest rate cuts spur optimism
* Dollar, bonds slide as Fed rate cuts cool risk aversion
* Oil falls below $65 a barrel on global recession fears
(Recasts with U.S. markets, changes byline, dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Oct 30 (Reuters) - Stocks rose worldwide on
Thursday as moves by central banks including the U.S. Federal
Reserve cheered investors and lifted aversion to risk even as
oil slid on fears of slowing demand from potential recession.
U.S. and European equity markets posted small gains after
stocks in Asia rallied sharply following interest rate cuts by
Taiwan, Hong Kong and the Fed, which also opened swap lines to
four key emerging countries on Wednesday.
Japan and Germany also said they would plough billions of
dollars into their economies to help cushion them against any
deep recession and complement a series of expected rate cuts.
The International Monetary Fund launched a short-term
financing facility for developing countries that have a good
economic track record but have seen credit markets dry up.
MSCI's benchmark emerging equities index <.MSCIEF> rallied
more than 10 percent and its world equity index <.MIWD00000PUS>
gained 3.2 percent.
Oil <CLc1> fell below $65 a barrel, reversing earlier gains
on pressure from concerns that demand might continue to weaken
after news that the U.S. economy shrank in the third quarter.
The monetary policy moves bolstered risk appetite as the
price of safe-haven government debt and gold fell, while the
dollar rallied against the euro and the yen, buoyed by demand
from U.S. corporations and global fund managers seeking to
square their books or rebalance their portfolios by month-end.
However, analysts were skeptical the market's optimism
would last very long considering short-lived euphoria after
recent concerted U.S. and European efforts to bolster banks and
avert a global recession that appears to be gaining traction.
Government data showed the U.S. economy shrank at a 0.3
percent annual rate in the third quarter, its sharpest
contraction in seven years, as consumers cut spending and
businesses slashed investment in the face of rising fears
America was slipping into recession.
"The Fed gave the market what it wanted," said Ryan
Detrick, senior technical strategist at Schaeffer's Investment
Research in Cincinnati, Ohio.
"There's still a lot of headwinds for the market, with
concerns about what is likely to be the worst Christmas in a
long time. The Fed has given the patient a lot of medicine, now
we want to see the patient show a recovery."
In fact, U.S. and European shares briefly turned negative
just before midday as shares of oil majors Exxon Mobil <XOM.N>
and Royal Dutch Shell <RDSa.L> slid. Exxon fell 2 percent and
Royal Dutch Shell 4.1 percent.
Before 1 p.m., the Dow Jones industrial average <> was
up 53.53 points, or 0.60 percent, at 9,044.49. The Standard &
Poor's 500 Index <.SPX> was up 8.12 points, or 0.87 percent, at
938.21. The Nasdaq Composite Index <> was up 12.74 points,
or 0.77 percent, at 1,669.95.
Buyers waded back into U.S. stocks in search of beaten-down
shares, particularly in energy, financials and technology.
Companies posting stronger-than-expected earnings included
Colgate-Palmolive Co <CL.N>, which was up 7 percent. Home
builders were another bright spot, with the Dow Jones home
construction index <.DJUSHB> up 3.6 percent.
European stocks ended slightly higher after a choppy
session, with banks leading the way.
Deutsche Bank <DBKGn.DE> gained 17.7 percent after it
avoided a third-quarter loss thanks to new accounting rules.
But the bank unveiled heavy losses in proprietary trading as
global financial markets remained rocky.
Banco Santander <SAN.MC> and UBS <UBSN.VX> gained 3.7
percent and 3.2 percent, respectively.
U.S. Treasury debt prices fell as stocks rose after the
news of a smaller-than-expected contraction in third-quarter
growth, curbing government debt's safe-haven allure.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
19/32 in price to yield 3.93 percent, while the 2-year U.S.
Treasury note <US2YT=RR> slid 2/32 in price to yield 1.57
percent.
The U.S. dollar hit session highs against the euro and the
yen after trading lower, as investors bought back the greenback
to rebalance portfolios for month-end purposes.
"It's month-end related," said Ron Simpson, director of
foreign exchange research at Action Economics in Tampa,
Florida. "We're seeing some dollar buying in portfoliorebalancing."
The dollar see-sawed against a basket of other major
currencies, with the U.S. Dollar Index <.DXY> down 0.28 percent
before 1 p.m. (1700 GMT).
The euro <EUR=> fell 0.52 percent at $1.2892, while against
the yen, the dollar <JPY=> rose 0.52 percent at 97.92.
U.S. light sweet crude oil fell $2.50 to $65 a barrel.
Spot gold prices <XAU=> fell $16.10 to $738.20 an ounce.
Equity markets surged in Asia's Thursday session, with
Japan's Nikkei average <> and the MSCI Asia-Pacific
ex-Japan stocks index <.MIAPJ0000PUS> both up 10 percent.
(Reporting by Ellis Mnyandu, John Parry, Gertrude
Chavez-Dreyfuss, Nick Olivari and Frank Tang in New York and
Rebekah Curtis and Ikuko Kao in London; Writing by Herbert
Lash; Editing by James Dalgleish)
