GLOBAL MARKETS-Less gloomy, but worries still abound

                                
 By Ian Chua
                                
 LONDON, Jan 23 (Reuters) - Stocks climbed in Europe and Asia
on Wednesday, after a surprise hefty U.S. interest rate cut, but
persistent worries about a U.S. recession and expectations of
even lower rates to come lifted safe-haven government bonds.
                                
 The move by the Federal Reserve on Tuesday to slash its key
federal funds rate by 75 basis points -- the largest cut in more
than 23 years -- to 3.50 percent was seen as underscoring the
risks facing the U.S. economy, but also helped lift a bit of the
gloom surrounding markets.
                                
 Investors believe a lot more needs to be done by the Fed to
shore up the U.S. economy. The yen, which tends to rise as
investors pare risky trades, regained ground against
higher-yielding currencies.
                                
 Markets are pricing in the chance of another 50 basis point
worth of rate cuts at next week's Fed policy-setting meeting.
[FEDWATCH]
                                
 "Generally speaking, it's a welcome relief and a bit of an
optimistic pause. The question that's still being digested is as
to the wisdom of yesterday's rate cut and the long-term
implications," said Tim Hughes, head of sales trading at IG
Index.
                                
 "But it's encouraging to see a degree of optimism and more
importantly, a shoring up of things. The rot seems to have been
stopped -- at least in the short term."
                                
 While off early highs, the FTSEurofirst 300 <.FTEU3> index
of top European shares was still up 0.5 percent by 0857 GMT with
London's FTSE <.FTSE> rising 0.1 percent and Germany's DAX
<.GDAXI> adding 0.4 percent.
                                
 This followed a 2 percent rebound for Japan's benchmark
Nikkei <.N225> and a near 5 percent rally for MSCI's measure of
other Asian stock markets <.MIAPJ0000PUS>.
                                
 Gains in commodities were slowly being chipped away by
worries the worst may not be over with Shanghai copper <SCFJ8>
up just 0.5 percent after earlier surging 2 percent, while U.S.
crude <CLc1> was little changed at $89.11 a barrel.
                                
 MSCI world equity index <.MIWD00000PUS> advanced 0.8
percent, off a 15-month low plumbed a day earlier. It was,
however, down about 12 percent this year.
                                
 
                                
 BONDS UP
                                
 Euro zone government bond futures surged, tracking gains in
U.S. Treasuries. The March Bund futures <FGBLH8> advanced 50
ticks to 116.56. 
                                
 The 10-year Bund yield <EU10YT=RR> slipped to 3.94 percent,
while the benchmark U.S 10-year Treasury yield <US10YT=RR> fell
to 3.46 percent, after earlier dipping below 3.4 percent for the
first time since mid-2003.
                                
 In the currency market, the dollar was little changed
against the yen at 106.42 <JPY=> on the day, while the euro
slipped 0.2 percent to 155.47 yen <EURJPY=>.
                                
 The euro was also slightly softer against the dollar at
$1.4608.
                                
 "On the one hand there are people who look favourably toward
the fact that the Fed acted at this juncture, saying it took
quick action to support the economy," said Akira Kato, senior
manager for the Bank of Tokyo-Mitsubishi UFJ's foreign exchange
trading department.
                                
 "But it's also true that the 75 basis point rate cut alone
wasn't sufficient to totally calm the turmoil in financial
markets or dispel expectations for a slowdown in the U.S.
economy."
 (Editing by Mike Peacock)