RTRS: Rate cut hopes, bargain hunting lift global stocks
By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - World stock markets put in a second consecutive session of strong bargain-hunting gains on Wednesday following a huge rally on Wall Street and amid widespread expectations of a sharp cut in U.S. interest rates.
The mood left the dollar weaker. Wall Street looked set for a weaker start, but only after the Dow Jones industrial average
rose more than 10 percent Tuesday.
The Fed is widely expected to cut its key rate for the ninth time since September 2007 later Wednesday, at least by 50 basis points. That would take rates down to 1.0 percent.
Investors have also been keeping an eye out for coordinated cuts. China said Wednesday it was cutting rates and others are in the same frame of mind with regard to easing given the deteriorating economic outlook and market turmoil.
If they do not act together, the Bank of Japan will consider lowering its policy rate at a meeting Friday, according to sources familiar with the matter. The Bank of England and the European Central Bank are both forecast to lower borrowing costs as well next week.
How much any of these actions will turn around near-term prospects for major economies is unclear, especially since the U.S. labor market is forecast to have lost nearly 180,000 jobs this month.
But stock markets were rallying on the prospect and by a hefty bout of bargain hunting after recent losses.
MSCI's all-country world index was up 3 percent after gaining 7 percent Tuesday, led by the 10 percent-plus Dow gains.
The emerging market counterpart was also up 3 percent, but has still lost more than 60 percent so far this year.
"The Fed doesn't have too many more rate cuts left at its disposal but there is still scope for them to ease further," said Darren Winder, an equity strategist at Cazenove.
"The market should be able to rally on from that. "We are due a significant rally from the levels we've got down to."
The pan-European FTSEurofirst was up 5 percent.
Earlier, Japan's Nikkei average climbed 7.7 percent or 589.98 points to finish at 8,211.90. It has gained 14.6 percent over the past two days, but is down 46 percent for the year-to-date.
