June 19, 2014 / 5:00 PM / 4 years ago

GLOBAL MARKETS-World stock index hits record, bonds rise, fueled by Fed

* MSCI's ACWI hits all-time high, Wall Street slips
    * Treasury yields fall to two-week low on dovish Fed tone
    * Oil hits nine-month high above $115 on Iraqi tensions
    * Dollar sags after Fed lowers long-term rate outlook

 (Adds close of European bond, stock markets)
    By Herbert Lash
    NEW YORK, June 19 (Reuters) - A leading global stock index
hit an all-time high and bond prices rose on Thursday a day
after the Federal Reserve lowered its forecast for target U.S.
interest rates in the long term, an outlook that lifted risk
appetite around the world.
    Stocks on Wall Street fell slightly after the benchmark S&P
500 surged to a new record on Wednesday when the Fed expressed
confidence the U.S. economic recovery was on track.
    Stocks in Europe rose to new six-year highs after equities
in Asia posted strong gains, while U.S. Treasuries yields fell
to two-week lows on the Fed's more dovish tone following a
meeting of the central bank's policy-makers.
    The dollar sank to three-week lows as many traders had
expected the Fed to take a more hawkish stance because of recent
signs of a pick-up in price pressure.
    The bond market is ignoring the Fed's lowered projections
for growth and what the outlook for unemployment says, which is
a reason to be cautious, said David Kelly, chief global
strategist for JPMorgan Asset Management.
    "A lot of money in short-term accounts needs to be put to
work, and that is helping both the bond market and stock market.
The stock market is doing well because the bond market did not
react in any negative way to what the Fed said," Kelly said.
    MSCI's all-country world index, which
accounts for about 85 percent of global investable equities,
rose 0.46 percent to pass an all-time high set in November 2007.
    In Europe, the FTSEurofirst 300 index of regional
shares rose 0.59 percent to close at 1,395.58 points after
earlier touching a six-year high.
    The Dow Jones industrial average fell 25.15 points,
or 0.15 percent, to 16,881.47. The S&P 500 lost 1.79
points, or 0.09 percent, to 1,955.19 and the Nasdaq Composite
 dropped 11.291 points, or 0.26 percent, to 4,351.545.
    Benchmark 10-year notes rose 2/32 in price to
yield 2.6079 percent. In Europe, peripheral euro zone bond
yields headed back toward historic lows. German bund futures
 ticked up 68 points to settle at 146.14.
    The greenback touched a three-week low against a basket of
currencies at 80.147. The euro strengthened to a 10-day
high against the dollar, while sterling advanced to its
highest level versus the greenback since October 2008.
    The euro gained 0.13 percent to $1.3812, while the dollar
fell 0.03 percent to 101.88 yen.
    Brent crude hit a nine-month high above $115 a barrel on
concerns heavy fighting in Iraq could limit oil supply from
OPEC's second-biggest producer.
    Brent was up 80 cents at $115.06 a barrel. The U.S.
crude oil futures contract for July, which expires on
Friday, rose 23 cents at $106.20 a barrel.

 (Reporting by Herbert Lash Additional reporting by Jamie
McGeever in London; Editing by Meredith Mazzilli and Chizu
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