* Global stocks rally as interest rate cuts spur optimism
* Treasury prices slip as Fed rate cut cools risk aversion
* Oil falls below $66 a barrel on global recession fears
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 30 (Reuters) - Stocks rallied around the
world on Thursday on optimism that interest rate cuts by the
U.S. Federal Reserve and other central banks will ease a
looming global recession, even as oil prices fell on concerns
about slowing demand.
Stocks surged in Asia after rate cuts by the Federal
Reserve on Wednesday and by Taiwan and Hong Kong on Thursday.
The Federal Reserve also opened four more dollar swap lines to
other countries.
Japan and Germany also said they would plough billions of
dollars into their economies to help cushion them against any
deep recession, while the International Monetary Fund also
launched a short-term financing facility for developing
countries that have a good economic track record but have seen
credit markets dry up.
The monetary policy moves bolstered risk appetite as the
price of safe-haven government debt and gold fell, while the
U.S. dollar rallied against the euro and the yen, buoyed by
demand from U.S. corporations and global fund managers seeking
to square their books or rebalance their portfolios by
month-end.
MSCI's benchmark world stocks index gained <.MIWD00000PUS>
gained 3.69 percent, while its emerging markets equities index
<.MSCIEF> rallied nearly 11 percent.
"There's perhaps more room for optimism today that we can
get through this than there was perhaps two weeks ago," said
Matt Kaufler, a portfolio manager at Clover Capital Management
in Rochester, New York.
RALLY DOUBTED
The optimism may not last for long though, considering the
euphoria after recent concerted U.S. and European efforts to
bolster banks proved short-lived, analysts cautioned.
"Is it going to be perhaps shallower than we were all
fearing or is it something that's going to build like a
snowball?" Kaufler asked.
Crude oil prices <CLc1> fell below $66 a barrel, reversing
earlier gains on concerns that demand might weaken further
after news that the U.S. economy shrank in the third quarter.
U.S. gross domestic product shrank at a 0.3 percent annual
rate in the third quarter as the sharpest pullback by consumers
since 1980 overwhelmed the benefit from ramped-up government
spending, the U.S. Commerce Department reported.
In Europe, German unemployment fell more sharply than
expected in October, pushing the jobless rate down to a new
16-year low of 7.5 percent.
"There's still a lot of headwinds for the market, with
concerns about what is likely to be the worst Christmas in a
long time," said Ryan Detrick, senior technical strategist at
Schaeffer's Investment Research in Cincinnati, Ohio.
"The Fed has given the patient a lot of medicine, now we
want to see the patient show a recovery," Detrick said.
The Dow Jones industrial average <> closed up 19164
points, or 2.13 percent, at 9,182.60. The Standard & Poor's 500
Index <.SPX> was up 23.80 points, or 2.56 percent, at 953.89.
The Nasdaq Composite Index <> was up 41.31 points, or 2.49
percent, at 1,698.52.
Stronger-than-expected earnings also boosted U.S. stocks.
Colgate-Palmolive Co <CL.N> rose 7.1 percent after its
quarterly profit beat estimates.
Technology shares rose as analysts see the sector poised to
be one of the biggest beneficiaries in a recovery.
Shares of Apple Inc <AAPL.O>, maker of the iPhone and iPod,
rose 6.2 percent, while Intel <INTC.O> shot up 8.2 percent.
Home builders were another bright spot, with the Dow Jones
home construction index <.DJUSHB> up 4.7 percent.
U.S. and European shares briefly turned negative just
before midday as shares of oil majors slid. Royal Dutch Shell
<RDSa.L> slid 4.1 percent but Exxon Mobil <XOM.N> rebounded to
end up 0.5 percent.
European stocks ended slightly higher after a choppy
session, with banks leading the way.
The pan-European FTSEurofirst 300 index <> rose 0.7
percent for a third straight day to end at 903.61 points.
Deutsche Bank <DBKGn.DE> gained 17.7 percent after it
avoided a third-quarter loss thanks to new accounting rules.
But the bank unveiled heavy losses in proprietary trading as
global financial markets remained rocky.
Banco Santander <SAN.MC> and UBS <UBSN.VX> gained 3.7
percent and 3.2 percent, respectively.
U.S. Treasury debt prices fell as stocks rose after the
news of a smaller-than-expected contraction in third-quarter
growth, curbing government debt's safe-haven allure.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
24/32 in price to yield 3.95 percent, while the 2-year U.S.
Treasury note <US2YT=RR> slipped 1/32 to yield 1.56 percent.
The U.S. dollar hit session highs against the euro and the
yen after trading lower, as investors bought back the greenback
to rebalance portfolios for month-end purposes.
"It's month-end related," said Ron Simpson, director of
foreign exchange research at Action Economics in Tampa,
Florida. "We're seeing some dollar buying in portfolio
rebalancing."
The dollar see-sawed against a basket of other major
currencies, with the U.S. Dollar Index <.DXY> off 0.40 percent
at 84.732.
The euro <EUR=> shed 0.26 percent at $1.2926, while against
the yen, the dollar <JPY=> gained 1.11 percent at 98.49.
U.S. crude <CLc1> settled down $1.54 at $65.96 a barrel ,
after trading up to $70.60 earlier. London Brent crude <LCOc1>
settled $1.76 lower at $63.71.
December gold futures <GCZ8> settled down $15.50 at $738.50
an ounce in New York.
Equity markets surged in Asia's Thursday session, with
Japan's Nikkei average <> and the MSCI Asia-Pacific
ex-Japan stocks index <.MIAPJ0000PUS> both up 10 percent.
(Reporting by Ellis Mnyandu, John Parry, Gertrude
Chavez-Dreyfuss, Nick Olivari and Frank Tang in New York and
Rebekah Curtis and Ikuko Kao in London; Writing by Herbert
Lash; Editing by James Dalgleish)
