* Global stocks drop on recession fears
* England, ECB, Swiss cut interest rates
* Dollar gains after rate cuts, U.S. stocks plunge
* Crude oil prices drop to 19-month low
By Daniel Bases
NEW YORK, Nov 6 (Reuters) - A flurry of deep central bank
interest rate cuts, designed to bolster investor confidence,
failed to prevent world stock markets from sliding on Thursday,
as the prospect of recession loomed in Europe and the U.S.
U.S. Treasury bonds, normally a safe-haven when stocks
fall, were flat ahead of a large issuance meant to help the
U.S. government fund it's bailout of banks and the economy.
The British pound lost ground after the Bank of England
(BoE) made a hefty 1.5 percentage point cut to its benchmark
interest rate, dropping it to a more than half-century low of
3.0 percent.
The euro, and Swiss franc also fell against the U.S. dollar
after both the European Central Bank and the Swiss central bank
cut benchmark rates by half a percentage point. The Czech
Republic also cut rates more than expected, causing the crown
to fall versus the euro.
Emerging market stocks and bonds also dropped in line with
the rout in developed economies. Crude oil prices fell to a
19-month low while gold dropped 1.0 percent on the expected
drop in demand.
In the United States, a gloomy sales outlook for technology
bellwether Cisco Systems <CSCO.O> , and the worst monthly sales
data in a decade for U.S. retailers contributed to weakness in
U.S. stocks.
Thursday's decline in U.S. equities follows the biggest
post-U.S. presidential election day drop ever.
However, benchmark U.S. stock indexes are still about 10
percent above their lows seen in late October.
"Now that the election is over, we're turning our attention
back to the economy," said Matt McCall, president of Penn
Financial Group in Ridgewood, New Jersey.
"We still have a terrible economy. I am sitting on the
sidelines in front of tomorrow's payrolls number," McCall
said.
The latest Reuters poll shows economists forecasting a
200,000 loss in non-farm jobs in October, and a rise in the
unemployment rate to 6.3 percent from 6.1 percent.
The Dow Jones industrial average <> fell 444.73 points,
or 4.83 percent, at 8,697.54. The Standard & Poor's 500 Index
<.SPX> lost 47.61 points, or 5.00 percent, at 905.16. The
Nasdaq Composite Index <>, dragged lower by Cisco, fell
69.80 points, or 4.15 percent, at 1,611.84.
In Europe, the FTSEurofirst 300 index of European shares
closed down 5.78 percent <FTEU3>, led down by banks and energy
shares.
The MSCI world equity index lost 6.37 percent
<.MIWD00000PUS>. Tokyo's Nikkei 225 index <> closed down
6.53 percent.
The benchmark 10-year U.S. Treasury erased earlier losses
to trade unchanged as the stock market's steep fall revived
some desire for safe-haven government debt. The U.S. 10-year
yield ended little changed at 3.702 percent. The U.S. Treasury
plans to sell $55 billion in bills, notes and bonds next week
to meet quarterly refunding needs. This is well above analyst
forecasts and the $18 billion refunding in November 2007.
CENTRAL BANK ACTIONS
The BoE's rate cut, the largest since 1981, caught the
markets by surprise.
"Many people will ask: what does the Bank know that the
rest of us don't?," Andrew Milligan, head of global strategy at
Edinburgh-based Standard Life Investments wrote clients.
"The Bank of England's inflation report due out next week
should provide the answer, giving investors full and detailed
information about its views on the depth and extent of the UK
recession and how far inflation might fall in 2009," he wrote.
Sterling gyrated after the cut, caught between investors
troubled by the size of the reduction and those seeing the
central bank taking aggressive actions to stave off recession.
The pound fell 1.88 percent to $1.5628 <GBP=>.
The U.S. dollar rose 1.44 percent against major currencies
as measured by the Intercontinental Exchange U.S. dollar index
for it's futures contract <.DXY>.
The European Central Bank cut interest rates by half a
percentage point to 3.25 percent, seen as relatively tame
compared to the BoE's action.
ECB president Jean-Claude Trichet, following the decision,
said he could not exclude further rate cuts as inflation
pressures ease and the euro zone faces its first recession.
"Lower European rates are certainly a positive development
for the economy and financial markets, but are likely to
contribute to further erosion in sterling and the euro," wrote
Michael Woolfolk, senior currency strategist at The Bank of New
York Mellon.
The European Commission said earlier this week it expects
gross domestic product to decline in the third quarter of 2008
in both the European Union as a whole and the euro area. Since
euro zone GDP shrank in the second quarter as well, this would
add up to two consecutive quarters of negative growth -- a
definition of a technical recession.
The euro fell 1.92 percent to $1.2701 <EUR=> while the
greenback rose 1.69 percent to 1.1784 Swiss francs <CHF=>.
The Swiss National Bank eased interest rates by 50 basis
points, taking its target band for the 3-month Swiss franc
LIBOR to 1.50-2.50 percent.
Commodity prices fell. U.S. light sweet crude oil <CLc1>
settled down $4.53, or 6.94 percent, to $60.77 per barrel, and
spot gold prices <XAU=> fell $6.25, or 0.85 percent, to
$732.90.
(Additional reporting by Chris Reese, Nick Olivari, Ellis
Mnyandu in New York and Natsuko Waki in London.)
