* MSCI world equity index steady on the day, Europe rallies
* Sweden surprises with 175 bps interest rate cut
* Oil near 4-yr low, euro zone gov bonds yields at life lows
By Natsuko Waki
LONDON, Dec 4 (Reuters) - European shares rallied on
Thursday after a record Swedish interest rate cut boosted
expectations for aggressive moves from the euro zone and UK,
while government bonds and the yen surged on economy concerns.
Sweden's central bank cut interest rates by a
bigger-than-expected 175 basis points to 2 percent. The European
Central Bank is expected to cut rates by as much as 75 bps later
and the Bank of England is seen slashing the cost of borrowing
by a full percentage point.
"The focus will be on the rate cuts. We're seeing central
banks around the world lowering rates," said Achim Matzke,
European stock indexes analyst at Commerzbank in Frankfurt.
"It could help find a bottom for stocks, but to say if the
real floor is in sight, it's too early for that."
The FTSEurofirst 300 index of leading European shares
<> rose 1.2 percent, erasing earlier losses.
While actions taken by central banks and governments help
the economy, investors are nervous that major economies -- most
of them already in recession -- are deteriorating rapidly.
Such concerns have pushed oil, which is sensitive to global
growth, below $46 a barrel <CLc1> to its lowest in nearly four
years. Funds seeking safer investment rushed to government
bonds, with euro zone 10-year yield <EU10YT=RR> falling to its
lowest since the introduction of the euro in 1999.
MSCI world equity index <.MIWD00000PUS> was unchanged on the
day. The index is down 47 percent so far this year.
Emerging stocks <.MSCIEF> fell 0.5 percent.
The Markit iTraxx Crossover index <ITEX05Y=GF>, made up of
50 mostly junk-related credits, held steady at 995 points,
having hit a record level of 1,020 on Wednesday.
U.S. crude oil fell 2.3 percent to $45.61 a barrel, losing
more than $100 in the space of just four months.
SLASHING RATES
The Riksbank said in a statement there had been an
unexpectedly rapid and clear deterioration in economic activity
since October.
"(The rate cut) was really good. This is exactly what they
should do. Now they are ahead of the curve," said Mats Kinnwall,
economist at Handelsbanken.
The bigger-than-expected Swedish cut boosted expectations
the ECB could go for a record 75 bps rate cut or even more.
The Bank of England is expected to cut interest rates by a
full percentage point to 2 percent, their lowest level in more
than half a century.
Rising prices knocked 10-year euro zone government bond
yields to 2.956 percent, while 30-year yields <EU30YT=RR> also
fell to a record low of 3.24 percent. The December Bund future
<FGBLc1> rose 50 ticks.
The benchmark 10-year U.S. Treasury yield <US10YT=RR> fell
to 2.645 percent, its lowest in more than 50 years.
Demand for safer government bonds accelerated this week
after the Federal Reserve signalled it could buy government and
agency bonds and the United States was confirmed to have entered
recession last December.
The yen hit a 13-year high against sterling of 134.18
<GBPJPY=R>. Sterling fell to a 6-1/2 year low of $1.4471 <GBP=>.
The dollar rose 0.6 percent <.DXY> against a basket of
currencies.
(Additional reporting by Blaise Robinson, editing by Mike
Peacock)
