* Stocks rise on defensive plays
* Record low service sector data lifts European govt bonds
* Consumer staples, pharmaceuticals lead stocks higher
* Dollar up on expected European interest rate cuts
(Updates with U.S. data, prices, changes dateline and byline)
By Daniel Bases
NEW YORK, Dec 3 (Reuters) - Global stock markets rose on
Wednesday, powered by defensive shares, as record contractions
in U.S. and European service sector data sent European
government bond yields to historic lows and raised hopes for
lower interest rates.
U.S. government bonds, however, fell as stocks rose, as
investors purchased shares of consumer staples such as
Coca-Cola <KO.N> and Johnson & Johnson <JNJ.N>.
Crude oil rose 1 percent after a U.S. government report
showed an unexpected drop in fuel stocks in the United States,
the world's biggest energy consumer.
Bleak services sector activity in November illustrated the
recessions on both sides of the Atlantic while the ADP Employer
Services report showed U.S. private employers cut a quarter of
a million jobs last month. ADP's report suggests Friday's
official jobs report will show losses of 300,000 jobs or more.
In the United States, the Institute for Supply Management's
non-manufacturing index fell to a record low of 37.3 in
November, from 44.4 in October. The level of 50 separates
expansion from contraction.
"It's an extraordinarily steep decline for a measure of
service sector activity," said Pierre Ellis, senior economist
at Decision Economics in New York.
"The severe damage to the service industry is another
indication of the extraordinary force of this recession," he
said.
Services represent 80 percent of U.S. economic activity.
The Markit Eurozone Purchasing Managers Index for services
companies, fell to 42.5 in November from October's 45.8 level,
the lowest in the survey's 10-year history. (For more, see
[].)
MSCI world equity index <.MIWD00000PUS> rose 1.08 points or
0.52 percent to 209.81.
Benchmark U.S. stock indexes were up in midday New York
Trade. The Dow Jones industrial average <> rose 70.97
points, or 0.84 percent, at 8,490.06. The Standard & Poor's 500
Index <.SPX> gained 8.33 points, or 0.98 percent, at 857.14.
The Nasdaq Composite Index <> was up 22.65 points, or
1.56 percent, at 1,472.45.
"The ADP report is part of the reason the market opened
down and why people are moving toward defensive positions,"
said Peter Jankovskis, director of research at OakBrook
Investments LLC in Lisle, Illinois. "There are people bracing
for the November payrolls report on Friday. We are in a very
nervous market," he said.
The FTSEurofirst 300 <> index of top European shares
cut its early losses to rise 4.02 points or 0.49 percent to
close at 829.33. Britain's FTSE 100 index <> rose 47.10
points or 1.14 percent to close at 4169.96.
Gains were led by drug companies like Novartis <NOVN.VX>
and GlaxoSmithKline <GSK.L>.
Earlier, Japan's Nikkei <> managed to eke out a 1.8
percent gain following a rebound on Wall Street on Tuesday, and
MSCI's index of other Asian stock markets <.MIAPJ0000PUS> put
on just 0.4 percent.
The 30-year euro zone government bond yield <EU30YT=RR>
plumbed 3.319 percent earlier, a record low according to
Calyon. In after-hours trade it fell even further, touching
3.28 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
7/32 of a points in price, pushing the yield up to 2.72
percent, just above Monday's five-decade low of around 2.65
percent.
RATE CUTS TO COME?
The grim services data raised hopes central banks in the
euro zone, Britain, New Zealand and Sweden will cut interest
rates this week in an effort to spur economic growth.
The European Central Bank 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.
Ahead of those decisions, the U.S. dollar maintained gains
across the board except against the Japanese yen, which
benefited from heightened risk aversion.
The U.S. dollar slid 0.27 percent to 93.12 yen <JPY=> while
the euro dropped 0.66 percent against the Japanese currency to
117.90 <EURJPY=>. The euro fell 0.42 percent against the
greenback to $1.2658 <EUR=>.
Sterling lost 1.05 percent to trade at $1.4749 <GBP=>.
Thailand cut interest rates 100 basis points on Wednesday,
the biggest reduction in eight years, to 2.75 percent. (See
[])
Crude oil prices <CLc1> were up 47 cents a barrel or 1
percent to $47.43. Grain prices rose while metals were on the
losing end, with spot gold <XAU=> off $9.15 or 1.17 percent to
bid $772.35 an ounce.
(Additional reporting by Burton Frierson, Nick Olivari and
Ellis Mnyandu in New York; Ian Chua in London; Rafael Nam in
Hong Kong)
