By Michael Patterson Oct. 8 (Bloomberg) -- U.S. stock-index futures climbed and European shares pared declines after the Federal Reserve and five other central banks cut interest rates in a coordinated bid to unlock credit markets. The dollar and government bonds fell. Morgan Stanley climbed 7.6 percent and UBS AG advanced 3 percent after the Fed, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point. ``Equity markets are looking for something, anything, to give them hope,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which manages about $125 billion. ``Today's coordinated interest-rate cut will help address this problem, but more will be needed.'' Futures on the Standard & Poor's 500 Index added 2.6 percent to 1,031.50 at 8:10 a.m. in New York, rebounding from a 4.3 percent decline. Europe's Dow Jones Stoxx 600 Index slipped 0.1 percent after earlier falling as much as 7.8 percent. Efforts by governments around the world to restore confidence in the banking system have failed to unlock credit markets and stem share declines that sent the MSCI World to the lowest level since August 2004 earlier today. The cost of borrowing in dollars overnight in London soared for a third day and European money-market rates climbed to records before the central banks' announcement. UBS, the European bank hardest hit by credit-related losses, climbed 3 percent to 19.99 francs. Morgan Stanley, which last month opted to convert itself into a bank holding company, rallied 7.6 percent to $19 in pre-market trading. Cutting Rates The Fed's decision brought its benchmark rate to 1.5 percent. The ECB's main rate is now 3.75 percent; Canada's fell to 2.5 percent; the U.K.'s rate dropped to 4.5 percent; and Sweden's rate declined to 4.25 percent. China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent. ``The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,'' according to a joint statement by the central banks. ``Some easing of global monetary conditions is therefore warranted.'' U.K. Prime Minister Gordon Brown's government said today it will invest about 50 billion pounds ($87 billion) in an unprecedented step to prevent a collapse of the U.K. banking system. Liquidity Plan As part of the plan, the government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a statement. The government will also provide a guarantee of about 250 billion pounds to help refinance debt. U.S. President George W. Bush signed into law a $700 billion bank-rescue package last week. Barclays Plc, the U.K.'s second-biggest bank by market value, gained 1.8 percent to 290 pence. Royal Bank of Scotland Group Plc, which had its credit rating cut this week by S&P, said it intends to participate in ``certain'' government measures. The shares jumped 21 percent to 108.6 pence, paring yesterday's 39 percent tumble. Bank stocks around the world have retreated over the past year after the collapse of the U.S. subprime-mortgage market spurred a retreat from high-risk debt and saddled global financial companies with more than $590 billion of credit losses and asset writedowns. The MSCI World Financials Index has dropped 49 percent since last October. $675 Billion The world's major banks may need $675 billion in fresh capital over the next several years to recover from the credit crisis, the International Monetary Fund said yesterday. The Washington-based lender raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook. The dollar dropped 0.5 percent to $1.3653 per euro at 7:14 a.m. in New York, from $1.3588 yesterday. The U.S. currency fell 1.3 percent to 100.12 yen, from 101.47. The euro declined 1.2 percent to 136.21 yen, from 137.89. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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