GLOBAL MARKETS-Wall St halts world rout in choppy trade
* World stocks rebound from 10th straight day of losses
* Wall Street up more than 2 percent at midday
* Investors look to relief from Fed at 2:15 p.m.
* Gold posts another record high (Recasts, adds details, updates prices)
By Leah Schnurr
NEW YORK, Aug 9 (Reuters) - World stocks rebounded from a 10-day rout on Tuesday as investors looked to the U.S. Federal Reserve to calm markets, though rallies in gold and the Swiss franc showed some were clinging to safe assets.
The Federal Reserve has rescued world markets in the past, which may explain why some investors were pulling back from the recent gloom. But such expectation also leave markets open to disappointment should the statement after the Fed's meeting on Tuesday be deemed inadequate.
The Fed may have limited options because the current crisis is not liquidity-driven, as it was in 2008. The meltdown across assets instead reflects worries about faltering economic growth and paralysis at the highest levels of government --on both sides of the Atlantic -- in dealing with economic problems.
"If there's no indication of help, selling could come back," said Cort Gwon, chief strategist at HudsonView Capital Management in New York.
In a sign of hesitation that the equity-market rebound could be cut short, safe-haven bets were still favored as gold hit another record and investors pushed into the Swiss franc.
Fears of a new global economic downturn, reinforced by a downgrade of the United States' credit rating last Friday and the debt crisis in the euro zone, had sent world shares down as much as 20 percent from May's peak.
MSCI's all-country world index .MIWD00000PUS recovered from early losses and was up 1.1 percent. The earlier drop put it on track for a 10th straight day of declines, which is extremely rare. The record is 13, back in the 1990s.
U.S. stocks were up more than 2.0 percent at midday and European shares .FTEU3 also bounced to provisionally close up 1.3 percent.
The Dow Jones industrial average .DJI gained 175.59 points, or 1.62 percent, at 10,985.44. The Standard & Poor's 500 Index .SPX was up 25.22 points, or 2.25 percent, at 1,144.68. The Nasdaq Composite Index .IXIC was up 71.99 points, or 3.05 percent, at 2,429.68.
The Fed statement was due at 2:15 p.m. EDT (1815 GMT). It is unclear, however, what the Fed's options are, with interest rates already near zero and the central bank's latest round of bond purchases having failed to stimulate credit demand. For details, see [ID:nN1E77724B]
The saving grace for markets now is that the main arteries of the financial system -- short-term funding markets and clearing and processing operations -- are not imperiled, as they were in 2008. Standard & Poor's downgraded major clearing companies on Monday but it has not affected their operations.
There were no signs of distress in overnight repurchasing markets, where institutions borrow money from one another using U.S. Treasury securities as collateral.
Treasuries, which soared on Monday, gave back some of those gains in active trading.
The 10-year Treasury note US10YT=RR fell 22/32, its yield rising to 2.39 percent, erasing about 1/3 of the previous day's gain and a smaller portion of the week's advance.
The 30-year bond US30YT=RR last traded down 47/32 yielding 3.73. It touched 3.75 percent in overseas trading and hovered near its lowest levels since Sept. 2010.
Higher-than-expected inflation data from China added to concerns about the global economy. The country's industrial output also grew at a slower pace in July, with the central bank trying to keep prices in check without dragging down the economy. [ID:nL3E7J91PZ]
A Reuters poll found the United States faces one-in-four odds of slipping back into recession, and a weaker economic outlook is raising the likelihood the Federal Reserve will soon do more to boost growth. [ID:nL9E7I401E]
Gold XAU= hit a record $1,778 an ounce in its biggest three-day rally since the financial crisis in late 2008. It gained more than 3 percent on Monday.
Spot prices retreated from the highs but were still up 1.4 percent.
The Swiss franc surged to record highs for the third day in a row against the euro and the U.S. dollar.
The euro dropped to its lowest on record at 1.0475 Swiss francs EURCHF=EBS on trading platform EBS. It was last at 1.0528 in volatile trade, down 1.7 percent for the day.
The franc also rose to an all-time high versus the dollar CHF=EBS of 0.73592 on EBS before easing to 0.7394, with the dollar down 2.1 percent.
The Japanese yen, which also tends to benefit in times of market stress, breached 77 yen per dollar, above levels that triggered official intervention from Tokyo last week. (Additional reporting by Ryan Vlastelica in New York; Editing by Dan Grebler)
- Housing, jobs data weaken, but overall economic picture still upbeat
- Putin critic Khodorkovsky in Germany after pardon |
- Target cyber breach hits 40 million payment cards at holiday peak |
- Pizza outlet attacked as India, U.S. fail to cool diplomat row |
- New York Mayor-elect's reputation for lateness parodied on Twitter