* MSCI world index up 1.3 percent at 211.37
* Fed announces new mortgage support programme
* Yen still firmer; oil falls after Monday's 9 pct bounce
By Natsuko Waki
LONDON, Nov 25 World stocks rose more than one
percent on Tuesday after the Federal Reserve unveiled a
programme to buy mortgage and consumer-related securities in its
latest attempt to support the U.S. financial system.
The Fed will buy up to $600 billion of mortgage-related debt
and securities plus $200 billion of consumer debt securities.
The announcement boosted European stocks and U.S. futures, which
pointed to a firmer open on Wall Street later.
"(The programme) should improve liquidity in asset-backed
securities. When you have demand for risk products, that should
diminish some appetite of the extreme flight-to-safety that
we've seen recently," said Scott Brown, chief economist at
Raymond James & Associates at St Petersburg in Florida.
The FTSEurofirst 300 index of leading European shares
.FTEU3 rose 1 percent, after rallying nearly 9 percent on
Monday -- its second biggest one-day percentage rise on record.
MSCI world equity index .MIWD00000PUS rose 1.1 percent.
U.S. stock futures were up around 2.5 percent SPc1.
Washington's announcement late on Sunday that it would
shoulder most losses on about $306 billion of Citigroup's risky
assets and inject new capital boosted world stocks by 6.6
percent on Monday.
On Monday, Wall Street capped its best two-day gain since
the aftermath of the 1987 stock market crash.
Earlier, BHP Billiton (BLT.L) fell nearly 40 percent after
the top global miner walked away from its hostile offer for
rival Rio Tinto (RIO.L). AXA (AXAF.PA) also fell more than 10
percent after the insurer cut its 2008 underlying profit
Emerging stocks .MSCIEF rose 2.7 percent.
The December bund future FGBLc1 was still up 18 ticks
while U.S. Treasury prices steadied after the benchmark 10-year
yield US10YT=RR fell to 3.22 percent earlier.
"The equity market rally we saw seems to be pretty much a
fleeting affair, consequently Treasuries remained underpinned,"
said Nick Stamenkovic, bond strategist at RIA Capital Markets.
The yen was up 0.6 percent at 96.50 per dollar JPY= while
the dollar .DXY erased early gains to stand flat on the day
against a basket of major currencies.
U.S. crude oil CLc1 fell 3.8 percent to $52.39 a barrel
after rising more than 9 percent on Monday.
Data confirmed that the U.S. economy is half way into
recession with third-quarter GDP contracting 0.5 percent.
Interest rate futures FEDWATCH are fully pricing in the
Federal Reserve to cut interest rates by half a percentage point
to 0.5 percent in December.
"Although we expect the Fed to lower its Fed funds target
rate to zero in January next year, the market has not fully
priced in the Fed's zero interest rate policy," JP Morgan said
in a note to clients. "Therefore, any negative surprises from
the U.S. releases should heighten speculation for more
aggressive Fed cuts."