* Dollar falls broadly after talk of large Fed stimulus
* Markets recover after China's surprising rate hike
* Stocks rise, boosted by U.S. earnings, outlooks
(Updates with U.S. markets' close, Nikkei futures)
By Manuela Badawy
NEW YORK, Oct 20 (Reuters) - The U.S. dollar slid on
Wednesday as investors expected the Federal Reserve will soon
offer more economic stimulus, while stocks and commodities
recovered after China's surprising interest-rate hike.
The dollar fell across the board after talk the U.S.
central bank plans to spend $500 billion in bond purchases
over the next six months, with an open-ended commitment to do
more in the next 18 months. Medley Global Advisors, a
consulting firm, described the Fed's plans in a report, a
source told Reuters. For details, see [].
The prospect of an increase in dollar supply hurt the
currency's value while it triggered a rally in equity markets.
Such a development will probably also anger emerging economies
contending with a flood of capital as investors chase higher
yields.
"Dollar weakness into the Nov. 3 FOMC meeting is the
clearest trade right now. Investors want to continue on that
path," said Amelia Bourdeau, senior currency strategist at UBS
in Stamford, Connecticut. "(Many) currencies dipped against
the dollar yesterday and investors are buying them back."
U.S. stocks rose as investors switched focus to positive
corporate earnings from the Chinese rate hike.
China's move stoked fears among investors about further
tightening in one of the global economy's main drivers and
coincided with rising tensions over global currency policies
before a meeting of the Group of 20 finance ministers this
weekend.
DOW BACK ABOVE 11,000
The Dow Jones industrial average <> climbed 129.35
points, or 1.18 percent, to end at 11,107.97. The Standard &
Poor's 500 Index <.SPX> gained 12.27 points, or 1.05 percent,
to finish at 1,178.17. The Nasdaq Composite Index <>
rose 20.44 points, or 0.84 percent, to close at 2,457.39.
Investors also digested news that Bank of America <BAC.N>
and possibly other U.S. banks may be forced to take back
billions of dollars in mortgages that should not have been
bundled into bonds.
Materials shares led the broad market higher, with
Freeport-McMoRan Copper & Gold <FCX.N> gaining 2.8 percent to
$95.35 and the S&P materials index <.GSPM> up 2 percent.
Commodities gained as the U.S. dollar dropped to a near
15-year low against the yen.
Boeing Co <BA.N> gave the biggest boost to the Dow.
Boeing's stock was up 3.3 percent at $71.36 after the
aerospace company posted a quarterly profit that beat Wall
Street's expectations and boosted its full-year forecast.
[].
Delta Air Lines <DAL.N> and US Airways Group <LCC.N>
shares also jumped after they reported strong profits.
Earnings from financial companies were mixed. Wells Fargo
& Co <WFC.N> reported higher earnings, but Morgan Stanley
<MS.N> reported a surprising loss. []
[]
The MSCI all-country world index <.MIWD00000PUS> rose 0.97
percent while Europe's FTSEurofirst 300 <> finished up
0.3 percent, led by strength in mining stocks, although mixed
earnings and big UK government spending cuts capped gains.
The December futures contract for Japan's Nikkei 225 stock
index <0#NK:> trading in Chicago fell 50 points to 9,495.
DOLLAR AND OIL SLIP, GOLD GAINS
Investors resumed selling the dollar against most
currencies on Wednesday, after the Medley report suggested the
Fed planned to boost growth by pumping more money into the
economy, possibly as soon as next month, though there has been
less certainty about how much it would spend.
The dollar was down against major currencies, with the
U.S. Dollar Index <.DXY> down 1.32 percent at 77.151.
The report accelerated a dollar sell-off that began
overnight. The euro <EUR=> was up 1.57 percent at $1.3948. It
hit an 8 1/2-month high above $1.41 last week. Against the
Japanese yen, the dollar <JPY=> was down 0.51 percent at 81.14
after hitting a 15-year low beneath 81 yen.
The Medley report confirmed a Fed official's comments,
made on Tuesday, that $100 billion a month in bond purchases
may be appropriate, giving traders an incentive to push the
dollar lower. []
The advisory firm's report also revived buying of U.S.
government debt, pushing up some prices and flattening much of
the yield curve.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 2/32 with the yield at 2.484 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up 1/32, with the yield at 0.3560
percent. The 30-year U.S. Treasury bond <US30YT=RR> was up
12/32, with the yield at 3.8935 percent.
In the energy market, U.S. crude oil for November delivery
<CLc1> rose $2.28, or 2.87 percent, to settle at $81.77 per
barrel, The November futures contract expired at the close.
In the commodities markets, spot gold <XAU=> rose more
than $9, or 0.7 percent, to $1,345.90 an ounce.
(Reporting and Writing by Manuela Badawy; Additional
reporting by Wanfeng Zhou, Steven C. Johnson, Daniel Bases,
Rodrigo Campos and Richard Leong in New York; Editing by Jan
Paschal)
