* Short-covering rally in soft commodities * Recovery in stock markets boosts sentiment
(Adds trader comment, boosts prices)
By David Brough
LONDON, Oct 29 (Reuters) - Coffee and sugar futures rallied on Wednesday, boosted by gains in equities and oil prices as optimism grew that central banks around the world would cut interest rates further to support the global economy.
"It's (rally) on the back of confidence in the financial markets," one London robusta coffee dealer said. "The confidence from the financials does help increase the volume."
A cut in Chinese interest rates had no immediate impact on soft commodities, but bolstered sentiment among market participants.
China cut its interest rate for the third time in six weeks on Wednesday, a measure the United States, Japan and European Central Bank are expected to follow by the end of next week to bolster economies facing recession.
January robustas were up $40 or 2.5 percent to $1,644 per tonne in light volume of 2,922 lots at 1145 GMT.
ICE Futures U.S. December arabica were up 3.15 cents or 2.9 percent to $1.1085 per lb. Arabicas settled at a 15-1/2-month low on Tuesday.
London white sugar futures rose in sympathy with raw sugar, supported by the firmer oil price, a weak dollar and recovery in stock markets.
"We're seeing technical short-covering in oversold conditions," said James Kirkup, a senior sugar broker with Fortis Commodity Derivatives.
ICE March raw sugar was up 0.34 cent, or 3 percent, to 11.48 cents a lb at 1151 GMT.
London December white sugar was up $8.0 or 2.6 percent to $318.50 per tonne in slender turnover of 483 lots.
Oil was above $65 a barrel on Wednesday, boosted by a surge in global stock markets on expectations the Federal Reserve and other central banks are poised to cut interest rates to revive global growth.
Japan could follow the United States in cutting interest rates this week, a source with knowledge on the matter said, in the latest steps to protect the world's two largest economies from the global financial crisis.
China is not likely to agree to subsidise exports of excess sugar as a way to support prices and help loss-making mills, but it will keeping buying some of the surplus for state reserves, industry officials said on Wednesday.
The China Sugar Association has proposed that Beijing subsidise exports of 500,000 tonnes of white sugar, aiming to cut stockpiles that have pressured domestic prices, left mills in the red and threatened farmers' income.
Tanzanian coffee prices were mixed at the latest auction and the amount offered and sold rose, traders said on Tuesday.
Cocoa futures moved higher with other commodity markets after U.S. futures settled firm on Tuesday, rebounding off Monday's 11-month low.
Benchmark ICE December cocoa were $51, or 2.6 percent, higher at $2,017 per tonne at 1157 GMT.
London March cocoa was up 11 pounds, or 0.8 percent, to 1,320 pounds per tonne in thin volume of 846 lots.
Traders focused on the firmer pound, which limited the upside in London futures prices.
Unlicensed cocoa buyers from neighbouring Ghana crossed into Ivory Coast to take advantage of an ongoing Ivorian cocoa strike while exporters wait for deliveries to load on ships, farmers said on Tuesday. (Additional reporting by Phakamisa Ndzamela in London; editing by Karen Foster) (Reporting by David Brough; editing by Peter Blackburn)
