(Adds fresh quotes and Wall Street outlook, updates prices)
By Natsuko Waki
LONDON, Jan 29 (Reuters) - Expectations of another round of
aggressive U.S. interest rate cuts later this week boosted
stocks and sent gold to historic highs on Tuesday while they
kept the dollar near a two-week low.
The Federal Reserve, which cut benchmark U.S. interest rates
by 75 basis points in emergency action last week to 3.5 percent,
is widely expected to lower the cost of borrowing further on
Wednesday, possibly by another 50 basis points.
Easier monetary policy helps risky assets such as stocks but
lowers the premium the dollar offers, making it less attractive
to hold the U.S. currency. A lower dollar in turn makes it
cheaper to buy gold.
Combined with Washington's $150-billion fiscal stimulus
plan, investors who expect U.S. financial markets aid packages
would re-ignite the economy are tentatively dipping their toes
back into risky assets.
"We are bullish but the conviction in that call is lower
than we'd like... We are at or near a bottom, clearly trying to
find some value out there," said Nick Hodson, head of
investments at Lloyds TSB Private Banking.
The FTSEurofirst 300 index <> rose 1.3 percent,
extending its rebound from last week's two-year lows, while Wall
Street was set for a positive start later given higher U.S.
stock futures <SPc1>.
The MSCI main world equity index <.MIWD00000PUS> was up 0.7
percent, having hit its lowest since October 2006 last week.
BEAR FEARS
Despite the MSCI's bounce since last week, the index has
fallen around 14 percent since hitting all-time highs in
November, raising concerns that world stocks are already in a
bearish downward trend.
"It feels like a bear market. If it quacks like a duck and
walks like a duck, it probably is a duck. And I've got to say it
feels very much like a bear market There's apathy about the
place. There's a sense of helplessness and despair," said Edward
Menashy, economist and strategist at Charles Stanley.
The dollar was down 0.1 percent against a basket of
currencies <.DXY>, having hit the two-week los on Monday.
Emerging sovereign spreads <11EMJ> widened 2 basis points
while emerging stocks <.MSCIEF> rose 0.8 percent.
The March Bund future <FGBLH8> was down 27 ticks.
Later in the day, U.S. durable goods and consumer confidence
data and Standard & Poor's closely-watched Case Shiller home
price index are due.
Gold <XAU=> and platinum <XPT=> hit record highs for a third
straight day, while silver rallied to its highest in 27 years.
Lower U.S. interest rates reduce the opportunity cost of holding
precious metals.
U.S. light crude oil <CLc1> rose half a percent to $91.47 a
barrel, supported by expectations that Fed rate cuts would
underpin demand for oil.
(Additional reporting by Michael Taylor and Rebekah Curtis)
