Global stocks falter, safe-havens fall amid market calm

By Herbert Lash

NEW YORK (Reuters) - Investors' willingness to take risk rose on Thursday but stocks pared gains a day after coordinated global interest rate cuts gave some calm to jittery markets worldwide and curbed the appeal of safe-haven assets.

Demand for government bonds, gold and low-yielding currencies -- all recent beneficiaries of investors who have scrambled for relative safety -- fell.

Oil traded little changed around $89 a barrel after a steep slide this week in response to expectations that demand will fall sharply if the global economy slides into recession.

The yen fell broadly and higher-yielding currencies bounced as extreme risk aversion receded after key central banks around the world cut rates on Wednesday in a coordinated response to halt the worst global financial crisis in almost 80 years.

U.S. stocks initially rose as investors snapped up beaten-down shares after a six-day slide on Wall Street pushed the Dow down about 34 percent from a record peak a year-ago on October 9, 2007. By mid-morning in New York, however, the bounce on profit-taking fizzled and stocks were little changed.

Shares of International Business Machines Corp rose 2 percent after it posted solid profit, making it a top boost to the Dow. Apple Inc, another tech bellwether, led the Nasdaq with a 4 percent gain.

"What we're seeing is just a bear market rally," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York. "You could see a significant rally over the next couple of days. The market is so oversold."

Mid-morning in New York, the Dow Jones industrial average was down 6.37 points, or 0.07 percent, at 9,251.73. The Standard & Poor's 500 Index was down 2.01 points, or 0.20 percent, at 982.93. The Nasdaq Composite Index was up 12.60 points, or 0.72 percent, at 1,752.93.

The cost of interbank borrowing overnight cash fell in response to the coordinated effort by financial authorities to restore calm to jittery markets. The cost of dollar, euro and sterling funds for the overnight rate all fell substantially, although by less than one-half percentage point.

The rate cuts were aimed in large part at unclogging the commercial paper market and keeping businesses humming.

Meanwhile, the cost of borrowing dollars for any period beyond the overnight rate rocketed. Three-month dollar Libor hit its highest this year as banks scrambled for greenbacks to cover U.S. currency positions and to fund dollar assets.

"We're not seeing any relief in term Libor fixings which tells us that the rate cut has exclusively impacted on the overnight market but it hasn't touched the Libor market at all," said BNP Paribas rate strategist Alessandro Tentori.

"And that's not a very good sign," Tentori said.

U.S. Treasuries fell for a third straight day as debt supply issues weighed on investor sentiment, while rising stock prices on Wall Street sapped any safety bid for bonds.

The benchmark 10-year U.S. Treasury note fell 30/32 in price to yield 3.77 percent, and the 2-year U.S. Treasury note fell 7/32 in price to yield 1.67 percent. Bond prices and yields move inversely to each other.