GLOBAL MARKETS-Stocks stumble as doubts rise on rate cut efforts

* European, U.S. stocks falter as doubts on rate cut rise

* Yen slips vs euro, U.S. dollar as risk aversion eases

* Oil slips to around $87 barrel on energy demand worries

* Gold falls as investors take profits after 9-day rise (Adds close of European markets)

By Herbert Lash

NEW YORK, Oct 9 (Reuters) - An equities rally stumbled on Thursday as investors cast doubt on a coordinated global effort to stem a worsening worldwide credit crisis by cutting interest rates, and even safe-haven assets fell as uncertainty ruled the day.

Demand for government bonds, gold and low-yielding currencies -- all recent beneficiaries of a scramble for relative safety as global equity markets tanked -- fell.

Expectations that energy demand will fall sharply if the credit crisis pushes the global economy into a prolonged recession pushed crude oil lower to around $87 a barrel.

The yen fell broadly and higher-yielding currencies bounced as extreme risk aversion receded in jittery financial markets.

Key central banks around the world cut rates on Wednesday in a coordinated response to halt the worst financial crisis to sweep the world in almost 80 years.

Rallies in both European and U.S. stocks proved to be short-lived, with a downturn on Wall Street quickly echoed in Europe. Financial and energy shares sold off on both sides of the Atlantic.

U.S. stocks initially rose as investors snapped up beaten-down shares and took heart from strong earnings from technology bellwether IBM after a six-day slide on Wall Street that has pushed the Dow by more than a third a record peak hit exactly one year ago. By mid-morning, however, the bargain-hunting bounce fizzled and the Dow and S&P 500 were lower, although the Nasdaq was slightly higher.

"There's still a significant amount of nervousness that the credit crisis has not seen its end and there are still more problems that lie ahead," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"People are scared about what they don't know and the fear of the unknown is what's causing people to sell stocks and ask questions later."

Before 1 p.m., the Dow Jones industrial average .DJI was down 120.18 points, or 1.30 percent, at 9,137.92. The Standard & Poor's 500 Index .SPX was down 14.71 points, or 1.49 percent, at 970.23. The Nasdaq Composite Index .IXIC was down 4.36 points, or 0.25 percent, at 1,735.97.

Shares in Morgan Stanley (MS.N) plunged as much as 25 percent on ongoing concern about the status of a planned $9 billion investment by Japan's top bank, Mitsubishi UFJ Financial Group (8306.T), in the U.S. investment bank.