* BOJ surprises markets with aggressive easing measures
* World stocks rally on further stimulus hopes, US data
* US dollar falls broadly on money supply concerns
* Gold hits record high, commodities surge
(Updates with U.S. closing prices, Nikkei futures)
By Manuela Badawy
NEW YORK, Oct 5 (Reuters) - World stocks surged to a
five-month high and the U.S. dollar fell broadly on Tuesday
after the Bank of Japan unexpectedly cut interest rates,
fueling speculation that other governments will take additional
actions to reinvigorate the global economic recovery.
Gold hit yet another record high above $1,340 an ounce,
while copper rose to its highest since July 2008 and oil rose
to a five-month high as the dollar, driven by investor concern
over the outlook for global growth, weakened further.
Risk assets soared on encouraging U.S. services sector
data, the BOJ's rate cut and the Reserve Bank of Australia's
decision not to raise rates, raising investor hopes that cheap
money will flood global economies. The Federal Reserve has
suggested it may engage in further quantitative easing unless
the U.S. economic outlook improves.
"The thinking today is that the printing of money is going
to take place," said Bucky Hellwig, senior vice president at
BB&T Wealth Management in Birmingham, Alabama.
"The short-term impact of that is to drive asset prices
higher. We've seen it almost across the board in commodities."
The BOJ's measures -- cutting its overnight rate target to
virtually zero and pledging to buy 5 trillion yen ($60 billion)
worth of assets -- pushed the Nikkei average <> to close
1.5 percent higher. The December futures contract for the
Nikkei 225 stock index <0#NK:> trading in Chicago rose 280
points to 9,630.
Tokyo's action came after Fed Chairman Ben Bernanke said on
Monday that more asset purchases could further ease financial
conditions and help the economy. []
The euro jumped to its highest since February against the
dollar on concerns that further U.S. quantitative easing could
undermine dollar strength.
A U.S. equities rally was fueled further by data showing
the pace of growth in the U.S. services sector, which accounts
for 80 percent of U.S. jobs, accelerated last month more
quickly than economists had expected, while hiring also picked
up. []
The Dow Jones industrial average <> closed up 193.45
points, or 1.80 percent, at 10,944.72. The Standard & Poor's
500 Index <.SPX> rose 23.72 points, or 2.09 percent, to
1,160.75, the highest level since mid-May. The Nasdaq Composite
Index <> gained 55.31 points, or 2.36 percent, to
2,399.83.
"Given unemployment and the state of the housing market,
central banks didn't have a choice but to take steps like this,
and it's what the market wanted to see," said Uri Landesman,
president of New York-based Platinum Partners. "This could be a
sign of things to come."
The pan-European FTSEurofirst 300 <> index of top
European shares closed up 1.4 percent at 1,066.12.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> rose 1.82 percent, its highest level since the
end of April, while the Thomson Reuters global equity index
<.TRXFLDGLPU> rose 0.23 percent.
DOLLAR'S LOSS
In currencies, the dollar index <.DXY> was down against
major currencies, falling 0.77 percent to 77.834. The euro
<EUR=> was up 1.10 percent at $1.3832 after climbing as high as
1.3860, an eight-month high. Against the Japanese yen, the
dollar <JPY=> was down 0.17 percent at 83.20 after dipping as
low as 82.96 yen on electronic trading platform EBS <JPY=EBS>.
The prospect of further quantitative easing from the Fed
modestly supported U.S. Treasury prices.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
2/32, its yield at 2.4722 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up /32, with the yield at 0.4067 percent.
The 30-year U.S. Treasury bond <US30YT=RR> was down 19/32, with
the yield at 3.7403 percent.
The Australian dollar <AUD=> fell 0.9 percent to $0.9594
after the central bank left interest rates steady for a fifth
month, confounding expectations of a rise. [].
Some analysts said the Australian dollar's recent strength
might have given the Reserve Bank of Australia reason to pause,
while speculation of U.S. and British quantitative easing may
have made it cautious.
Central banks in Japan, the United States and Britain have
been under political pressure to do more to support economies
showing only tepid recovery from the worst recession in
decades.
In Japan, slowing export growth, a surprise fall in factory
output and companies' worries about the strong yen have
strengthened the case for the BOJ to ease policy. Last month
authorities intervened in the currency market to curb the yen's
strength.
The U.S. currency has fallen 10 percent this year against
the yen.
Governments' ultra loose monetary policies may debase the
value of currencies and are leading to continued demand for
gold and the rise of other commodities.
Gold <XAU=> climbed higher on concern about more monetary
easing and possibly higher long-term inflation. The precious
metal hit another record high bid at $1,341.20 an ounce. Oil
prices <CLc1> rose more than 1 percent to $82.82 a barrel and
copper <CMCU3> rose to $8,229 per tonne, its highest in two
years. Tin <CMSN3> rose to an all-time high at $26,010 a tonne,
while platinum, aluminum, zinc, lead and nickel touched
multi-month highs.
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Global interest rates: http://link.reuters.com/wed86p
BOJ policy rate: http://link.reuters.com/syz76p
Yen - taking on the market: http://r.reuters.com/fac44p
BOJ balance sheet/JGB buying: http://link.reuters.com/ger94p
RBA rates and commodity index: http://link.reuters.com/byg86p
Chronology of BOJ policy moves: []
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(Additional reporting by Leah Schnurr and Chris Reese in New
York; Editing by Kenneth Barry and Dan Grebler)
