* European stocks rise, Wall St falters after rate cuts
* Yen slips vs euro, U.S. dollar as risk aversion eases
* Oil little changed at $89 barrel after week's big slide
* Gold slips as investors take profits after 9-day rise
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 9 (Reuters) - Investors' willingness to take
risk rose on Thursday but stocks pared gains a day after
coordinated global interest rate cuts gave some calm to jittery
markets worldwide and curbed the appeal of safe-haven assets.
Demand for government bonds, gold and low-yielding
currencies -- all recent beneficiaries of investors who have
scrambled for relative safety -- fell.
Oil traded little changed around $89 a barrel after a steep
slide this week in response to expectations that demand will
fall sharply if the global economy slides into recession.
The yen fell broadly and higher-yielding currencies bounced
as extreme risk aversion receded after key central banks around
the world cut rates on Wednesday in a coordinated response to
halt the worst global financial crisis in almost 80 years.
U.S. stocks initially rose as investors snapped up
beaten-down shares after a six-day slide on Wall Street pushed
the Dow down about 34 percent from a record peak a year-ago on
Oct. 9, 2007. By mid-morning in New York, however, the bounce
on profit-taking fizzled and stocks were little changed.
Shares of International Business Machines Corp <IBM.N> rose
2 percent after it posted solid profit, making it a top boost
to the Dow. Apple Inc <AAPL.O>, another tech bellwether, led
the Nasdaq with a 4 percent gain.
"What we're seeing is just a bear market rally," said Dave
Rovelli, managing director of U.S. equity trading at Canaccord
Adams in New York. "You could see a significant rally over the
next couple of days. The market is so oversold."
Mid-morning in New York, the Dow Jones industrial average
<> was down 6.37 points, or 0.07 percent, at 9,251.73. The
Standard & Poor's 500 Index <.SPX> was down 2.01 points, or
0.20 percent, at 982.93. The Nasdaq Composite Index <> was
up 12.60 points, or 0.72 percent, at 1,752.93.
The cost of interbank borrowing overnight cash fell in
response to the coordinated effort by financial authorities to
restore calm to jittery markets. The cost of dollar, euro and
sterling funds for the overnight rate all fell substantially,
although by less than one-half percentage point.
The rate cuts were aimed in large part at unclogging the
commercial paper market and keeping businesses humming.
Meanwhile, the cost of borrowing dollars for any period
beyond the overnight rate rocketed. Three-month dollar Libor
hit its highest this year as banks scrambled for greenbacks to
cover U.S. currency positions and to fund dollar assets.
"We're not seeing any relief in term Libor fixings which
tells us that the rate cut has exclusively impacted on the
overnight market but it hasn't touched the Libor market at
all," said BNP Paribas rate strategist Alessandro Tentori.
"And that's not a very good sign," Tentori said.
U.S. Treasuries fell for a third straight day as debt
supply issues weighed on investor sentiment, while rising stock
prices on Wall Street sapped any safety bid for bonds.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
30/32 in price to yield 3.77 percent, and the 2-year U.S.
Treasury note <US2YT=RR> fell 7/32 in price to yield 1.67
percent. Bond prices and yields move inversely to each other.
European stocks were higher, breaking a three-session
losing streak, after fresh government and central bank action
to combat the financial crisis.
The FTSEurofirst 300 <> index of top European shares
was up little changed after rising around 1.5 percent.
The low-yielding yen fell from a three-year high against
the euro and a six-month peak versus the dollar that it hit the
previous day, although it later pared some losses.
"The stocks overnight had a bit of a rally ... and that's
given the dollar/yen a little of a boost," said Steven Butler,
director of FX trading at Scotia capital in Toronto.
Against the yen, the dollar <JPY=> was up 1.86 percent at
101.10. The dollar rose against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.32 percent at 81.174.
The euro <EUR=> rose 0.22 percent at $1.3659.
Gold slipped as investors cashed in gains that took the
precious metal to a nine-day high in the previous session.
Spot gold prices <XAU=> fell $24.95 to $881.55 an ounce.
"There are still a lot of speculative positions in the
market and some banks are taking profit to make up losses on
other markets," Commerzbank senior trader Michael Kempinski
said.
Oil was lower. U.S. light sweet crude oil <CLc1> fell 40
cents to $88.55 a barrel.
Stocks clung to small gains overnight in Asia. MSCI's index
of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 2.05
percent after a 9 percent tumble on Wednesday, its biggest
single-day fall in at least two decades.
(Reporting by Ellis Mnyandu, Chris Reese and Wanfeng Zhou in
New York and Jamie McGeever, Tamawa Kadoya, Jane Merriman and
Jan Harvey in London; Writing by Herbert Lash; Editing by James
Dalgleish)
