* Global stocks decline as gloomy economic news flow resumes
* Euro zone services activity falls to a fresh record low
* Central banks expected to cut rates aggressively
* MSCI World stock index down 0.4 percent
By Ian Chua
LONDON, Dec 3 (Reuters) - A tentative rebound in global
stocks spluttered on Wednesday while euro zone government bond
yields hit a three-year low as gloomy economic news highlighted
the case for more aggressive interest rate cuts in Europe this
week.
The euro stayed on the backfoot and oil held near a 3-1/2
year low a day before the European Central Bank, Bank of England
and Sweden's Riksbank are all widely expected to cut borrowing
costs.
Supporting those expectations, economic reports on Wednesday
showed the euro zone's services economy fell deeper into
recession in November than initially thought and inflationary
pressures eased.
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"This is a horrible survey across the board, showing that
the euro zone service sector is being hit ever harder by the
financial crisis, muted consumer spending and markedly weaker
activity in key export markets," said Howard Archer, economist
at IHS Global Insight.
Australia's economy grew at its slowest pace in eight years
in the third quarter as gathering recession abroad and
evaporating equity wealth at home curbed spending by consumers
and businesses. []
Central banks worldwide are cutting rates to fight
recession. They are also considering more measures to stabilise
financial markets and restore battered consumer and investor
confidence, including help for struggling U.S. auto makers.
The FTSEurofirst 300 <> index of top European shares
fell 1.5 percent in early trade with Britain's FTSE 100 index
<> down 0.9 percent and Germany's DAX <> shedding 1.7
percent.
MSCI world equity index <.MIWD00000PUS> eased 0.4 percent.
"The markets are still looking very tender," said Justin
Urquhart Stewart, investment director at Seven Investment
Management.
"Markets are not focusing on any of the good news and the
good news is rates are being cut, commodity pries are coming
down, stimulus packages are being put together and banks are
being supported. But the market's feeling very depressed."
Japan's Nikkei <> managed to eke out a 1.8 percent gain
following a rebound on Wall Street on Tuesday, but MSCI's
measure of other Asian stock markets <.MIAPJ0000PUS> put on just
0.2 percent.
EURO PRESSURED AS ECB CUT EYED
Also under pressure, the euro fell 0.7 percent against the
dollar on the day to $1.2626 and was also weaker against the yen
<EURJPY=>, while the dollar climbed 0.6 percent against a basket
of major currencies <.DXY>.
But demand for less risky assets continued to mount, helping
to push government bond yields lower.
The 10-year euro zone government bond yield <EU10YT=RR>
plumbed a low of 3.004 percent -- a level last seen in Sept.
2005, while the benchmark 10-year yield for U.S. Treasuries
<US10YT=RR> was at 2.727 percent, not far off a five-decade low
of around 2.651 percent set on Monday.
"Economic indicators are plunging like there is no tomorrow
and central banks are gearing up for significant easing," said
Elwin de Groot, a strategist at Rabobank, noting 100 basis point
rate cuts from Australia and Thailand this week.
The ECB meets on Thursday and most economists expect an
interest rate cut of 50 basis points, while the Bank of England
is forecast to cut rates by an aggressive 100 basis points.
Sweden's central bank is likely to slash rates by a record
100 basis points, or possibly more, on Thursday when it
announces the result of its meeting, which it brought forward by
almost two weeks.
Meanwhile, U.S. crude <CLc1> edged up 41 cents to $47.37 but
was within striking distance of Tuesday's trough of $46.82 -- a
low last seen in May 2005.
Gold <XAU=> slipped to $774.80 an ounce, down $6.70 from New
York's notional close on the back of a broadly firmer dollar.
(Additional reporting by Rebekah Curtis and Kirsten Donovan in
LONDON, Rafael Nam in HONG KONG)
