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World stocks near record high after bumper Fed cut

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Commodities cheer hopes of economic lift

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Bond markets take it all in their stride, BoE up next

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Sept 19 (Reuters) - A wave of risk appetite

swept global financial markets higher from stocks and the dollar

to gold and oil on Thursday, after the U.S. Federal Reserve

kicked off its long-awaited interest rate cutting cycle with a

half point move.

Europe was waiting to see if the Bank of England delivers a

surprise cut of its own later. That is seen as only an outside

chance, so for the time being the bulls were content with the

first Fed cut in four years.

The cut, and the prospect of more before the end of the

year, pushed MSCI's 47-country world stocks index

close to a record high. Wall Street futures

were up after the S&P 500 hit its own all-time peak

overnight, and Europe also opened strongly.

In currency markets, the dollar overcame its initial

post-Fed dip. London's gold bugs basked in

bullion's latest highs, and oil and the industrial

metals complex were stronger on the view that lower rates equals

stronger demand.

"The Fed delivered a very dovish rate cut. This bodes well

for risk assets," Brown Brothers Harriman Senior Markets

Strategist Elias Haddad said, adding that this was likely to

keep the pressure on the dollar.

The U.S. central bank lowered its benchmark policy rate by

50 basis points to 4.75%-5%. It also dramatically cut the median

'dot plot' profile on where its rate setters expect rates to be

in future, though Fed chief Jerome Powell emphasised prudence.

"I do not think that anyone should look at this and say, oh,

this is the new pace," Powell told reporters after the half

point cut was announced.

"We're recalibrating policy down over time to a more neutral

level. And we're moving at the pace that we think is

appropriate, given developments in the economy."

In Europe, the dollar was well off recent lows hit against

the euro, at $1.1127, and steady around 142.70 yen,

after climbing as high as 143.95.

Bond markets were recalibrating too after their recent busy

spell. Ten-year Treasury yields were at just under

3.7% compared with 4.7% back in April, while Europe's benchmark

- the 10-year German Bund - was at 2.2%, a 1-1/2

week high.

BANK OF ENGLAND

It wasn't all about the Fed. Norway's central bank held its

rates at a 16-year high but signalled it might cut them next

year, while a Bank of England decision was due at 1100 GMT.

Sticky UK services inflation data on Wednesday has seen

traders temper their bets that the BoE might trim the UK's 5%

interest rate again, although they are still pricing a near 20%

possibility.

In Asia overnight, the bulls drove Japan's Nikkei up

2.1% and stock markets in Australia and Indonesia

to record highs.

Expectations that the People's Bank of China will also ease

its policy on Friday helped too. Chinese bond yields dipped

again, the yuan hit a 16-month peak of 7.0640 against

the dollar, and Hong Kong's Hang Seng jumped over 2%.

One dampener was South Korea returning from a holiday with

heavy selling in chipmakers, after a downbeat Morgan Stanley

note that halved SK Hynix's ( HXSCF ) target price. SK Hynix ( HXSCF ) shares

tumbled 6% and Samsung fell 1.6%.

No such worries for commodity markets. Oil prices were up

over 1%, with benchmark Brent crude futures climbing

back above $74 a barrel for the first time in over a week and

U.S. crude at $71.50.

Bellwether global industrial metals copper, aluminum

and nickel all rose 1-1.4%.

The Bank of Japan will round out a bonanza week for interest

rate decisions on Friday. It is not expected to do anything this

meeting but in stark contrast to the broader global trend it

could line up another rate hike for as soon as October.

(Additional reporting by Tom Westbrook in Singapore; Editing by

Mark Potter)