* Stocks rise on defensive plays
* Record low service sector data lifts European govt bonds
* Consumer staples, pharmaceuticals lead stocks higher
* Dollar rises on expected European interest rate cuts
(Adds close of U.S. markets, changes byline)
By Herbert lash
NEW YORK, Dec 3 (Reuters) - Global stock markets rose on
Wednesday, spurred by companies that do well in a weak economy,
as record contractions in U.S. and European service sector data
sent European government bond yields to historic lows and
revived a safe-haven bid for U.S. debt.
McDonald's Corp <MCD.N> and Coca-Cola Co <KO.N> were the
top boosters to the Dow, while other large-cap stocks, such as
Procter & Gamble <PG.N>, which are all seen as a defensive
hedge against the weakening economy, were big gainers.
But dire economic data, including a U.S. private sector
report that pointed to a worsening jobs outlook, kept an
aversion to risk alive, helping the dollar and yen to rally
against major currencies.
U.S. Treasury debt prices turned positive in the afternoon
amid a revived safe-haven bid for government bonds.
Oil prices extended losses as U.S. fuel demand continued to
crumble under the weight of the financial crisis, prompting the
Organization of Petroleum Exporting Countries to sharpen the ax
for another round of production cuts.
Wall Street rose, after a day of volatile trade, as
investors bought stocks that will hold in an economic slump.
"Investors are trying to find stable (areas) -- consumer
staples, health care and biotech," said John Schloegel, vice
president of investment strategies for Capital Cities Asset
Management in Austin, Texas. "They're asking, 'What might be
the safest parts of the market?'"
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 250,000 jobs
last month. ADP's report suggests Friday's U.S. government 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.
In Europe, the Markit Eurozone Purchasing Managers Index
for services companies fell to 42.5 in November from the prior
month's 45.8 level, the lowest in the survey's 10-year
history.
"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 Dow Jones industrial average <> rose 172.60 points,
or 2.05 percent, at 8,591.69. The Standard & Poor's 500 Index
<.SPX> rose 21.93 points, or 2.58 percent, at 870.74. The
Nasdaq Composite Index <> rose 42.58 points, or 2.94
percent, at 1,492.38.
MSCI world equity index <.MIWD00000PUS> rose 1.4 percent.
The FTSEurofirst 300 <> index of top European shares
cut 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 <> posted 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> gained
9/32 in price to yield at 2.67 percent, just above Monday's
five-decade low of about 2.65 percent. The 2-year U.S. Treasury
note <US2YT=RR> was little changed, yielding 0.89 percent.
RATE CUTS TO COME?
The grim services data raised hopes central banks in the
euro zone, Britain and Sweden will cut interest rates this week
in an effort to spur economic growth. The Reserve Bank of New
Zealand cut interest rates by 150 basis points, as expected, to
5 percent,
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 yen, which benefited from
heightened risk aversion.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.18 percent at 86.749. Against
the yen, the dollar <JPY=> was unchanged at 93.37.
The euro <EUR=> was down 0.01 percent at $1.2711.
Gold ended nearly 2 percent lower on the back of a stronger
dollar.
"It's really has been a dollar play," said futures analyst
Rob Kurzatkowski at optionsXpress. "And I am surprised that
with the yields in bonds declining so much, there hasn't been
more activity in gold."
U.S. gold futures for February delivery <GCG9> settled down
$12.80 at $770.50 an ounce in New York.
U.S. crude <CLc1> fell 17 cents to settle at $46.79 a
barrel after hitting a 3-1/2-year low of $46.26 earlier in the
session. Brent crude <LCOc1> finished unchanged at $45.44.
(Reporting by Richard Valdmanis, Chris Reese, Nick Olivari,
Burton Frierson and Frank Tang in New York, and Ian Chua and
Jan Harvey in London; writing by Herbert Lash; Editing by
Leslie Adler)
